Wealth Within chief analyst Dale Gillham said that the telecommunications sector is “looking worse for wear”, with the sector as a whole down by 16.3 per cent this year.
Mr Gillham said that the $15 billion proposed merger between TPG and Vodafone to challenge the giants Telstra and Optus was flagged by the Australian Competition and Consumer Commission (ACCC), which has raised concerns amongst investors.
TPG shares fell by 17.85 per cent at the open following this news. Since then, shares have traded back up to above $6.60 as the stock struggles to find support, he said.
“We were not surprised to see TPG shares fall on this news and we initially expected TPG to fall back and fill the gap at around the $6–6.20 price. This news has simply accelerated this move down,” Mr Gillham said.
He also said that it has been a rough year for Telstra shareholders, with Telstra shares down by 17.21 per cent.
“Whilst things were initially looking up for some time, there’s nothing exciting happening with Telstra to signal a buy right now,” he said.
“The announcement of the 20 new 5G towers were on target as expected and nothing to be too excited about.”
The telecommunications sector in Australia tends to move in a similar way to the US, and with US telco stocks taking a turn, telecommunications here in Australia may soon follow, he warned.
“That being said, there will be good opportunities to trade telecom stocks over the medium term into 2019,” he said.
“For Telstra to indicate a turn and potential bullish run, we need to see an increase in buyer momentum behind the stock and see the stock rise above $3.09 a share. Telstra still has a lot to prove and the timing is just not right at this point. We would rate Telstra as a stock to watch for now.”
As for TPG, Mr Gillham expects the stock to continue to fall to around $6.00–6.20.
