TELUS stock analysis: here’s why it is crashing and what next

TELUS stock remains in a strong freefall this year, and is hovering at its lowest level since April 2017. It has dropped from the record high of $25.6, which it reached in April 2022, to the current $12.6. This retreat has seen its market capitalization has dropped from over $45 billion to $20.4 billion today.

TELUS Corporation has faced major headwinds

TELUS Corporation is a top Canadian telecommunications company that offers services to millions of customers. It operates in several industries, including health, agriculture and consumer goods, home and business security, and business process outsourcing. 

The company’s business is facing substantial challenges, which explains why its stock has been in a freefall in the past few months. This retreat continued after the company published its financial results in which the management decided to slash its dividends in a bid to preserve its cash. It hopes that the dividend cut will save it $2.78 billion through 2028.

TELUS also eliminated its dividend reinvestment plan (DRIP) plan, a situation that allows investors to automatically use dividends they received to buy the stock at a discount rather than receiving its cash. This situation normally boosts the stock price and helps investors compound their returns.

The company also announced a big loss, and started a strategy to sell some of its assets, a move aimed at boosting its balance sheet. Its results also showed that its revenue slowed down in the quarter because of its digital business

The recent results showed that its operating revenue dropped by 2% to $4.9 billion in the second quarter, while its operating expenses jumped by 32% to $6.5 billion. Consequently the company made a net loss of over $1.83 billion during the quarter, mostly because of goodwill impairment of $2.1 billion in its TELUS Digital division. 

At the same time, the company plans to keep spending this year. Its capital expenditure rose to $678 million, with the management predicting that it will spend $2.6 billion this year. The company blamed this increase to the ongoing inflation and supply chain issues. 

TELUS stock technical analysis

TELUS stock chart | Source: TradingView

The weekly chart shows that the TELUS stock has been in a strong sell-off in the past few years, underperforming the TSX Composite Index. It slipped from a high of $25.62 in 2022 to the current $12.6. 

The stock remained inside the narrow range of between the support at $16.9 and resistance at $20.72. It moved below the lower side of the channel on April 6 this year, confirming that bears have prevailed.

TELUS stock formed a death cross pattern in December as the 50-week and 200-week Exponential Moving Averages (EMA) crossed each other. This pattern often leads to more downside since it signals that bears remain in control.

The stock has moved to a crucial support level since it was the lowest level in 2020. Therefore, the stock will likely continue falling, potentially to the key support level of $10. 

All currencies are in Canadian dollar.

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