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The Telstra Group Ltd (ASX: TLS) share price has experienced a significant decline of 16% over the past year. This drop has some investors questioning whether now the right time is to invest in this ASX telco stock. To make an informed decision, it's essential to evaluate Telstra's outlook for FY25 and beyond.
Telstra’s Defensive Position
Telstra is considered one of the more defensive ASX shares, given the essential nature of internet connectivity in today's world. Despite this, Telstra shares have seen a substantial decline, which may surprise some investors. One of the main reasons for this downturn is the struggles within Telstra's enterprise division. However, Telstra has recently unveiled plans to turn this segment around.
FY25 Targets and Strategic Initiatives
Telstra has announced several initiatives to improve its enterprise segment and has provided early guidance for FY25. The company expects to deliver underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of between AU$8.2 billion and AU$8.3 billion in FY24. For FY25, Telstra has provided guidance for underlying EBITDA of between AU$8.4 billion and AU$8.7 billion, indicating potential growth of at least AU$100 million in the next financial year.
Additionally, Telstra has reaffirmed its commitment to its T25 compound annual growth rate (CAGR) ambitions for underlying EBITDA, earnings per share (EPS), and return on invested capital (ROIC) growth. Despite this, the telco has stated it will not raise subscriber prices in line with inflation. The T25 target for underlying EBITDA is mid-single-digit CAGR between FY21 and FY25, while underlying EPS is expected to grow by "high-teens CAGR" over the same period.
Telstra's management remains confident in the company’s ability to continue growing mobile revenue and EBITDA, which could be a positive sign for investors.
Analyst Expectations and Financial Projections
According to the broker UBS, Telstra is expected to generate AU$2.05 billion in net profit after tax (NPAT) and pay a dividend per share of 18 cents in FY24. UBS forecasts slight growth in FY25 for revenue, earnings before interest and tax (EBIT), NPAT, and dividend per share. Specifically, UBS predicts Telstra could achieve AU$2.06 billion in NPAT and pay a dividend per share of 19 cents in FY25. This would result in a grossed-up dividend yield of 7.5%.
Furthermore, UBS suggests that Telstra's net debt could slightly improve to AU$12.6 billion. The broker currently has a price target of AU$4.40 on Telstra shares, implying a potential rise of around 20% in the next 12 months.
