Telus upgraded to “Buy” at TD

TD Cowen analyst Vince Valentini upgraded Telus  (Telus Stock Quote, Chart, News, Analysts, Financials TSX:T) to “Buy” from “Hold”, saying improved industry pricing discipline and potential positive news on capital spending and non-core asset sales were enough to move ahead of the company’s May 8 first-quarter results.

“Subsequent to recent weakness in the share price, our intention had been to wait to see Q1 results on May 8 before considering an upgrade, but we see too many positives on three fronts to wait,” Valentini said.

As reported by the Globe and Mail, Valentini said Canadian telecom pricing has improved in April, with better wireless offers from the three incumbents and attempts by Telus and Rogers to raise front-book wireline internet prices in Western Canada. He said the sector appears to have responded to investor concerns about price wars with a “quick pivot back to much healthier pricing levels.”

He also said Telus could still reduce capital intensity, even though it already has the lowest capital intensity ratio in the industry, and said incoming leadership may find further savings.

On asset sales, Valentini said TD Cowen already models $1.5-billion in non-core divestitures by the end of 2026, but believes Telus could ultimately monetize about twice that amount. Potential assets include agriculture, real estate, copper, venture investments, healthcare and possibly parts of Telus Digital.

Valentini raised his target to $20 from $19. The average target is $20.59.

“TELUS’ yield remains attractive when compared to other Canadian options,” he said, though he noted execution risk around the dividend. TD Cowen currently forecasts a 30% dividend cut in 2027, which Valentini said would bring the payout ratio “well below 100%.”

Valentini said non-core asset sales, the near-completion of Telus’s copper-to-fibre transition and lower future capital spending should support leverage improvement, cost savings, lower churn and higher ARPU.

“We are upgrading the stock to ‘Buy’ as we see sufficient upside to the share price owing to better price discipline and increased confidence in our forecasts,” he said.

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