Telus’s Strategic Adaptation and Financial Caution: Analyst Recommends Hold Rating

Telus (TU – Research Report), the Communication Services sector company, was revisited by a Wall Street analyst yesterday. Analyst Matthew Griffiths from Bank of America Securities maintained a Hold rating on the stock and has a C$22.00 price target.

Matthew Griffiths has given his Hold rating due to a combination of factors surrounding Telus’s strategic moves and market conditions. Telus’s proposal to acquire the remaining shares of Telus Digital, which it does not already own, is a response to evolving market dynamics. This move is seen as a shift from the initial public offering strategy, indicating Telus’s adaptation to current challenges and its confidence in the long-term potential of Telus Digital.
However, the valuation of Telus Digital at 10.6 times the estimated 2025 earnings and the potential dilution of shares if the transaction is completed in all shares, along with the lack of disclosed synergies, contribute to a cautious outlook. Additionally, while Telus aims to maintain a neutral impact on its balance sheet with this acquisition, the broader context of lower price and subscriber growth in its core telecom business suggests a need for careful financial management. These factors collectively support a Hold rating as Telus navigates these strategic and market challenges.

In another report released on June 6, National Bank also maintained a Hold rating on the stock with a C$23.00 price target.

TU’s price has also changed moderately for the past six months – from $14.750 to $16.260, which is a 10.24% increase.