Will Telus Regain Its "Growth Stock" Status?

After dipping roughly 4.5% on Thursday on news that Industry Canada will make it easier for new entrants to gain access to the wireless market, on Friday, Telus Corp. (TU) shares ended the day at C$46.62. The company also announced a C$763-million deal to buy software firm Emergis Inc.

So while some might consider Telus shares cheap at this price and when compared to its telecom peers, RBC Capital Markets analyst Jonathan Allen reluctantly downgraded it to “sector perform” from “outperform.” His price target was cut by C$10 to C$60 per share.

While acknowledging a depressed share price for Telus, Mr. Allen told clients in a note that he does not see any positive catalysts coming and structural concerns remain. He says to expect weakness for the stock for as long as the next six months, but investors with a long-term approach could still see value here.

In terms of the Emergis deal, Mr. Allen said while it is neutral to Telus’ valuation and somewhat fits the company’s data strategy, he thinks the cash could be put to better use from a shareholder’s perspective.

So will Telus regain its status as a “growth stock?”

The analyst said operating weakness caused by aggressive promotions could stabilize in the next few quarter, but likely not enough to return Telus shares to its previous growth positioning.