Stock of the day: Telstra

(AI video summary)

This video was created on 15 January for IG audiences by ausbiz.

ASX code: TLS

Telstra's $700 million AI investment

Telstra, a major telecommunications company, is investing $700 million to implement artificial intelligence (AI) across its operations. This effort, in partnership with Accenture, aims to boost efficiency and cut costs in the long run. Telstra will allocate $100 million annually over seven years for this transformation.

This move follows a broader industry trend where companies use AI to streamline processes and enhance competitiveness.

Stability and dividend potential

Despite the announcement of this substantial investment, Telstra's share price has remained largely stable. Technical analysis shows that Telstra's stock has hovered around the $4 mark for the last four years, with little movement. The current resistance line indicates that if the stock breaks through this barrier, it might rise to $4.40, providing a modest potential upside.

However, Telstra is mainly seen as a dividend stock, offering a 5% yield. Investors who bought shares closer to $3 may have found better opportunities than at current levels.

Investment alternatives to Telstra

Analysts suggest considering alternatives to Telstra, such as Spark New Zealand. Spark presents a potentially higher yield and is selling off non-core assets, which could lead to capital gains. While Telstra's AI investment may bring long-term benefits, the immediate impact on earnings is likely minimal.

Investors looking for better yields and growth prospects might diversify their portfolios with stocks like Spark, which currently provides a more favourable price-to-earnings (P/E) ratio and higher yield than Telstra. As the market changes, traders should evaluate both short-term and long-term opportunities in the telecommunications sector.