Telus stock is near its bottom, this investor says

Is Telus (Telus Stock Quote, Chart, News: TSX:T) a buy? At least one investor says the worst case scenario is much lower than the current price.

Telus got pounded down by the market pullback in February and March and while the stock has regained some ground, it’s well off its high for 2020. Which makes for a nice buying opportunity, says Ross Healy, chairman of Strategic Analysis.

“I like it a lot. It’s got a nice yield. It’s got its fair market value that’s 60 per cent higher than the current stock price, the dividend is is quite secure and they’ve got a nice balance sheet,” says Healy, speaking on BNN Bloomberg on Thursday.

One of Canada’s “Big Three” telecom companies, Telus is also the largest healthcare technology company in the country through Telus Health. That business has been in the news lately for the telemedicine app Babylon, a Telus Health product which has been adopted by the Alberta government as a way for patients to virtually consult with physicians during the current COVID-19 environment.

Described as a virtual walk-in clinic by Alberta premier Jason Kenney, the app has been criticized on a number of fronts since implementation last month, in one respect for being lax in terms of continuity of care between physicians and patients. Babylon is also being investigated by Alberta’s privacy commissioner after concerns were raised about Telus Health’s use of patient data.

At the same time, Telus has responded to COVID-19 by donating smartphones to hospitalized coronavirus patients, committing $10 million towards COVID-19 response and CEO Darren Entwistle has donated one-quarter of his annual salary to Canadian healthcare workers on the front lines.

But on the telecommunications front, Healy says that while the industry can have its ups and downs, as a company Telus is on solid ground.

“What’s really important is that the business that they’re in, is it’s not perfectly stable, but
it’s pretty stable, and I think this company is going to come through for you,” Healy said.

“My downside risk is twice book which is $20 and that’s the that’s the worst I can see.” Telus has settled into the $22 range for the past couple of weeks, which is better than the sub-$20 territory it briefly visited during the worst of the market pullback but still well below the all-time high of $27.74 hit on February 11.

Ahead of Telus’ first quarter earnings due on May 7, Telus last reported earnings on February 13 where its fourth quarter report showed revenue up 2.5 per cent to $3.9 billion and adjusted EBITDA up 7.9 per cent to $1.4 billion.

For the year ahead, Telus guided for revenues up six to eight per cent and EBITDA to climb between five and seven per cent. The company targets dividend growth of between seven and ten per cent annually between 2020 and 2022.

“The fourth quarter concluded another year of robust customer growth where we added a leading 713,000 net customer additions, while achieving our annual revenue and EBITDA growth targets for the ninth consecutive year,” wrote Entwistle in a press release.

“Without question, it is the unparalleled execution by our talented team that enables our shareholder-friendly initiatives, notably our multi-year dividend growth program, which is now in its tenth year. In 2019, we returned more than $1.3 billion to shareholders, building on the close to $18 billion we have returned to shareholders since 2004, representing over $29 per share,” Entwistle said.