TELSTRA seemed like a licence to print money when it was sold on to the sharemarket progressively from the 1990s.
A former government monopoly with a stranglehold on the country's telecommunications market, it had once been Australia's most profitable company.
But this view turned out to be anything but true as new competitors challenged its most profitable markets and new technologies ate away at the value of its national copper communications network. Indeed, from a high of $9.20 back in the dotcom bubble days of 1999 it was all downhill for Telstra until it hit an all-time low of $2.55 about a year ago. Then something unusual happened. Telstra began to make gains even when the rest of the market was falling.
As this week's chart shows, provided by Paul Ash, Victorian president of the Australian Technical Analysts Association, from the first quarter of this calendar year Telstra's share began to rise.
"'Dow theory' states that the trend is up if there are higher highs and higher lows. Stocks in Australia at the moment with this characteristic are hard to find but Telstra is in an uptrend," Ash says. "The Australian stockmarket as defined by the All Ordinaries Index can be said to have been tracking sideways generally from October 2009 to July 2011. Since then the trend is distinctly downward despite last week's gains. Telstra on the other hand had been drifting down from August 2009 to November 2010. It then made a double bottom with a low in March 2011." That double bottom proved the low point for the stock and the uptrend beginning then was given extra confirmation with the 30-week moving average price line also turning upwards a few weeks later. "The Telstra share price is in a rising trend channel this year defined by the rising parallel lines above and below the price line. Telstra will find some resistance at $3.35 but is expected to rise to $3.50," Ash says.
Despite its drubbing in recent years, Telstra remains one of the best-known brands in the country. It is involved in significant areas of the growing telecommunications market. It stands to gain big payments from the national broadband network.
Its market capitalisation is $38 billion, while the dividend yield is a healthy 9 per cent. Its price-earnings ratio is slightly below that of the market at 11.53 times.
This column does not constitute financial advice and those wanting to invest should seek professional counsel.
Frequently Asked Questions about this Article…
What has happened to Telstra's share price recently and is it rising?
According to the article, Telstra's share price hit an all-time low of $2.55 about a year ago and then began to rise from the first quarter of the calendar year. Technical analysis described a double bottom (low in March) followed by a rising trend channel and a 30-week moving average that turned upwards, indicating a renewed uptrend.
Why did Telstra's stock fall from its former highs?
The article explains Telstra fell from its 1999 high of $9.20 because new competitors entered its most profitable markets and new technologies reduced the value of its national copper communications network, eroding its monopoly-style profits.
Do technical analysts consider Telstra to be in an uptrend?
Yes. Paul Ash, Victorian president of the Australian Technical Analysts Association, said Telstra shows the Dow Theory characteristic of higher highs and higher lows, a double bottom formation, and a rising trend channel—signs that technical analysts view as an uptrend.
What technical price levels should investors watch for Telstra shares?
The article notes Telstra may face resistance at $3.35 and is expected to move up toward $3.50 within the rising trend channel. Watch the 30-week moving average and the parallel lines that define the trend channel for support and resistance.
What are Telstra's key fundamentals mentioned in the article?
Telstra's market capitalisation is reported as $38 billion, its dividend yield is described as a healthy 9%, and its price-earnings ratio is about 11.53 times—slightly below the market level mentioned in the article.
How could the national broadband network (NBN) affect Telstra's earnings?
The article says Telstra stands to gain significant payments from the national broadband network, which could provide a boost to the company’s revenues and potentially support dividends.
Is the article offering financial advice on buying Telstra shares?
No. The article explicitly states it does not constitute financial advice and recommends that anyone wanting to invest should seek professional counsel.
Given Telstra's high dividend yield, is it a good income stock for everyday investors?
The article highlights a 9% dividend yield as a strong feature, but it also warns readers that the column is not financial advice. Everyday investors should weigh yield alongside price trend, company fundamentals and seek professional guidance before making income-oriented investment decisions.
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