Telstra shares breakout to 8 year highs: Has the defensive telco run its course?

Telstra (ASX: TLS) shares have hit levels not seen since August 2015 thanks to its defensive characteristics and potential monetisation of fixed assets. It’s also just delivered a better-than-expected half-year result.

The result was bolstered by a strong performance from the company's Mobile division, which enjoyed several tailwinds including higher prices, a return to international roaming and the Optus cyber incident. Some key financial highlights of the result include:

• Revenue of $11.58 billion vs. consensus of $11.40 billion

• Underlying EBITDA of $3.9 billion vs. consensus of $3.80 billion

• Net profit of $934 million

• Interim dividend of 8.5 cents

• The four metrics were up a respective 6%, 12%, 26% and 6.3% against the prior corresponding period

As Telstra rallies into rather unfamiliar territory, is the stock getting too expensive? Or does the better-than-expected result justify its share price outperformance? Let's take a look at what brokers are saying post results.

UBS: Neutral rating with $4.40 target price

The result was described as "solid" and supported by "returning momentum in Mobile ARPU (average revenue per user) growth." UBS notes that there are still "significant challenges" in segments such as Fixed Enterprise business and Fixed C&SB but the momentum in Mobiles is likely to offset this, for now.

For the second-half of FY23 and FY24, UBS expects "operating momentum in Mobiles to continue as Telstra benefits from SIO (services in operation) growth with return in international migration, prices increases and return in international roaming."

Macquarie: Outperform rating with $4.64 target price

There were plenty of highlights from Macquarie's note, including factors such as the better-than-expected dividend, EBITDA beat, Telstra reaffirming earnings and capex guidance, roaming generating $100m in the first half (80% of pre-Covid levels) and steady progress with 5G coverage (now 81.2% of the population).

That said, the not so good included higher fixed costs, softer-than-expected subscriber growth of 68,000 and company guidance that full-year earnings will come in at the lower end.

Nevertheless, Macquarie viewed the company as a "stable cash generating business with positive catalysts throughout calendar year 2023."

Goldman Sachs: Buy rating with $4.60 target price

Goldman notes how Telstra is tracking towards the top end of its FY23 EBITDA guidance range but its dividend profile remains largely unchanged. "Despite the stronger second half, we expect an 8.5 cent DPS before growing to 9 cents in FY24."

Similar the Macquarie's commentary, Goldman notes how it was a very strong mobile result but postpaid net-adds were softer than expected.

Telsta 12-month share price chart (Source: Market Index)