Telus Corp.'s Slide Offers Buying Opportunity

Telus Corp.'s (TU) summer share price slide has provided investors with a solid opportunity, according to UBS analyst Jeffrey Fan, who upgraded his Telus rating from "neutral" to "buy" despite reducing his price target from C$70 to C$66.

In a note to clients, Mr. Fan said disappointing second quarter results and credit market concerns that deflated the market's takeover premium were to blame for Telus' recent poor showing, as summed up by the 22% drop in share value since early July.

The analyst told clients the second quarter was the "low point" for the company's wireless division and said he expects Telus' wireless earnings before interest, taxes, depreciation and amortization [EBITDA] to grow 9% year-over-year in the second half of the year and by 15% in 2008.

Mr. Fan added that any potential negative news still to come has probably already been priced into the stock's valuation.

"We believe the current price provides investors with an attractive entry point," he wrote.

While in the near-term there are few catalysts, we believe the company's dividend growth and share repurchases will help shares reach this target price over the medium to long term.

TU 1-yr chart: