Telkom SA SOC Ltd (JSE: TKG) is experiencing a significant boost in its share performance, with a 5% gain today, contributing to a month-to-date increase of 13.56%. Despite a year-to-date decline of 15%, recent developments suggest a positive turnaround. The telecom giant anticipates a remarkable interim profit jump of up to 50%, driven by reduced depreciation and improved performance. This news has spurred a 7% increase in shares, signalling a potential recovery.
The company’s strategic move to lower depreciation aligns with analysts’ expectations of a substantial profit increase. Telkom’s resilience in a market dominated by larger rivals, Vodacom and MTN, is evident in its market value, which has more than halved since 2021. The upcoming earnings report on November 21 will be closely watched for insights into Telkom’s financial health and cash flows.
Technical Analysis
Telkom SA’s 1-day chart illustrates an impressive 5% gap at the open of Wednesday’s trading, with the current price at R24.90. Trading around the 38.20% Fibonacci retracement level, the price is above the 50-SMA (green line) but below the downward-sloping 100-SMA (blue line) and 200-SMA (red line). A rising RSI at 60.57 indicates increasing momentum.
Short-term trading opportunities may emerge towards the resistance level at the 50.00% Fibonacci retracement level of R27.25 if the bulls sustain a push above the 38.20% Fibonacci retracement level and 100-SMA. A break above this resistance could confirm bullish momentum, targeting the R28.97 and R30.34 resistance levels.
However, failure to sustain a push above the 38.20% Fibonacci retracement level could offer short-term trading opportunities towards the 23.60% Fibonacci retracement level at R23.64. A break below the 23.60% Fibonacci retracement level would likely bring the R22.21 and R20.40 support levels within the bears’ reach in the short term.
Market Sentiment: The technical outlook suggests a potential short-term bullish trend, aligning with positive fundamental developments.
Summary:
Telkom SA SOC Ltd appears to be on a path to recovery, capitalizing on lower depreciation and improved performance. The positive sentiment from its profit surge and the potential bid for a controlling stake indicates a turnaround in investor confidence.
The convergence of positive fundamental and technical factors suggests a favourable sentiment, with the R25.64 and R27.25 price levels likely to act as levels of significance in the coming sessions. However, caution is advised pending ahead of the earnings released, with the R23.64 price level likely to act as a level of interest.
Sources: TradingView, Trading Economics, Telkom, MarketWatch, Reuters, MT Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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