Should you buy TPG Telecom Ltd’s Shares at this Price?

What does TPG Telecom do?

TPG Telecom [ASX:TPM] is a full service telecommunications company. It offers voice, internet, and cloud data solutions to consumers, SMEs, corporate and government sectors.

TPM shares have been trending up significantly since 2012.

Why Did TPG’s Share Price drop recently?

After making a high of 12.93 on 29 July 2016, it has made a low of $8.60 on 21 September 2016, which might be at a support level. That’s not too bad for those who invested and held the stock, which has risen over 600% over four years.

However, the price gapped down after TPG released its latest FY2016 Results on 20 September 2016. Although the results were an improvement over the previous period, it just beat guidance by $300k, when previously it used to do that by millions.

What Now for TPG Telecom?

The headwind facing TPG comes as users migrate to the National Broadband Network (NBN). Analysts are forecasting access fees will be be up to four times higher, as the NBN seeks to recover costs. That is going to put a real squeeze on profit margins down the line for companies like TPG.

This stock could come under further selling pressure over the next few years as the market factors in  the longer term negative impacts of the changing broadband environment.

TPG also declared a dividend of $0.075 cents on 20 September. Post-dividend selling could also partly account for the fall.

TPG is in a tough competitive environment, and is forecasting 7% growth for 2017, the lowest in six years. It holds its AGM on 7 December 2016.

Terence Duffy,
Cycles, Trends and Forecasts

Terence Duffy is an analyst and chartist, specialising in researching economic trends and cycles.  His primary focus is housing and land affordability. But you can also depend on him to offer his unique analysis of stock market charts. As Terence will show you, the charts often forecast, well in advance, the good or bad news to come.

Money Morning Australia