Telstra Share Price Down as Profits Decline (ASX:TLS)

Australia’s largest telco faced a string of challenges the last 12 months. With The COVID-19 pandemic, bushfires at the end of 2019 and their T22 restructuring plan, it’s all a lot to juggle.

Telstra Corporation Ltd [ASX:TLS] reported their earnings recently, with the struggles being reflected in lower results and a lower share price.

The TLS share price was trading at $3.15 at the time of writing.

ASX TLS Share Price Chart - Telstra Shares Down

Source: Optuma

What’s happening at Telstra?

Telstra started out with a restructuring plan in mind, announced in mid-2018. The plan was to cut 8,000 jobs and reduce underlaying costs by $2.5 billion.

This plan was met with push back from the unions at the time.

Deputy national president of the Community and Public Sector Union (CPSU), Brooke Muscat-Bentley, said they had been working with Telstra since the cuts were announced but was not satisfied with the redundancy process.

We think that Telstra can do more to invest in their staff and invest in a genuine redeployment and voluntary redundancy process, rather than just tapping people on the shoulder and asking them to leave.

While the company had been dealing with the restructure, disaster struck…for the nation and Telstra.

The bushfires were a national crisis causing catastrophic damage to the country. Telstra reacted quickly to this by supporting bushfire-affected customers, providing free mobile services to firefighters and fixing damaged infrastructure, which cost Telstra $44 million.

The woes continued for the company with the emergence of the COVID-19 pandemic, putting a halt to their restricting plans with no more layoffs for six months starting from June 2020.

With so much to contend, it should come as no surprise that Telstra’s net profit after tax fell 14.4% to $1.8 billion.

This will deliver dividends for the 2020 financial year of 16 cents per share, fully franked, giving shareholders $1.9 billion.

Where to from here for Telstra Shares

The company still has a lot on its plate to deal with, with no end in sight for the COVID-19 pandemic and it already being August, it’s fair to assume the disruptions will still be felt through to FY21.

Telstra Share Price Chart 2

Source: Optuma

The Telstra share price recently moved up to touch the resistance level of $3.54 before falling away to $3.15 at time of writing.

With shares falling below the resistance levels of $3.45 and now $3.30, if this movement were to continue then the levels of $2.96 and $2.71 may halt the fall in the future.

For Telstra to be considered strong, the price would need to create a new high and would be done by moving back up past $3.54.

Regards,

Carl Wittkopp,

For The Rum Rebellion

PS: Three Deep Value Stocks Currently Under-Priced: These ASX gems could potentially deliver market-beating returns as the economy recovers. Click here to learn more.

 


Carl Wittkopp writes for The Rum Rebellion and has a diploma in Financial Planning. He specialises in the technical analysis of stocks.


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