Shares of Telus Corp continue to languish within the SIA S&P TSX 60 Index Report, where they now rank at the absolute bottom of the list, as shown in the attached matrix position chart. Telus shareholders have endured many years of weak performance, with the stock returning negative 0.48% over the past five years. This represents a significant opportunity cost when compared with the iShares S&P TSX 60 Index ETF (XIU.TO), which is up 100.93% over the same period. The situation appears to be deteriorating further as the shares remain below the 200 week moving average and are once again approaching a critical support level at $18 at a time when relative strength remains very low and overall market volatility continues to increase. Also notable is a recent spike in trading volume, which is particularly concerning given the retracement back toward important support. If the $18 level is broken, the next potential support on the candlestick chart may be near the 2020 lows around $14.
The attached point and figure chart further illustrates the current weakness in T.TO shares, where persistently low relative strength indicates that sellers continue to dominate supply and demand. The SIA matrix position overlay reinforces how the prolonged price weakness has translated into consistently low relative strength, highlighted in red, and matching its position within the SIA S&P TSX 60 Index Report. Support on the point and figure chart currently sits at $18.03, with additional support at $16.65 and again near the 2020 level at $14.50. Potential resistance may emerge at the 3-box reversal level of $19.90, as well as at the upper resistance level of $22.86; a price that has been tested several times over the past two years but has repeatedly failed to break, leaving Telus in a challenging technical position.
In trying to understand why Telus shares remain depressed, it appears that the investment community is focused on the company’s higher than usual debt load, even though management has stated plans to reduce leverage over the coming years. Free cash flow has been improving and has supported small dividend increases, but the combination of high spending, significant debt and a competitive telecom landscape continues to create pressure on financial flexibility.
The company’s outlook depends on how well it can manage these costs while continuing to grow its customer base and eventually generating returns from its long term investments. Telus is currently in a period of heavy capital spending to upgrade and expand its networks, including fibre, 5G and new AI related infrastructure. Although these projects offer long term potential, they require substantial upfront investment. To help manage this, the company has been exploring ways to bring in additional capital, such as a possible investment in its wireless tower business, with the aim of using those proceeds to reduce debt.
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