Telus (TSX:T) has seen a 10% decline in the past year and is currently down about 30% from its 2022 high. This has left contrarian investors contemplating whether Telus stock is undervalued and worth buying for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividend income and total returns.
As a major Canadian communications company with a market capitalization of nearly $35 billion, Telus primarily provides wireless and wireline communications services to Canadian residential and business customers. Unlike its large competitors, Telus has refrained from investing in media assets over the past decade. This strategic decision has proven beneficial as traditional media segments struggle to attract advertising revenue amid competition from digital alternatives.
Instead, Telus has focused on expanding its Telus Health business through acquisitions and organic growth, offering digital health solutions to global businesses with employee benefit programs. Additionally, Telus Agriculture has expanded into the full consumer goods segment, focusing on making the entire food value chain from producer to retailer more efficient and effective. Telus International (TSX:TIXT), which was spun out via an initial public offering in early 2021, provides multi-lingual call services and IT services to global firms. However, TIXT encountered revenue headwinds in the first half of 2023 and subsequently reduced its guidance for the year, leading to a 60% drop in its share price over the past 12 months, contributing to the weakness in Telus stock.
Despite these challenges, Telus expects its 2023 consolidated revenue to rise by about 10% compared to the previous year, with growth in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of at least 7%. Telus believes the worst of the issues for TIXT are in the rearview mirror, having trimmed staff by 6,000 in 2023 to lower expenses for the year.
For investors, the question remains whether Telus stock is oversold and if it’s the right time to buy, sell, or hold. With the company’s strategic focus on digital health and agriculture, as well as its positive outlook for 2023, investors may find an opportunity in Telus stock. However, the challenges faced by Telus International and the broader market conditions should be carefully considered before making any investment decisions.
