Briefly –
- Royal Mail saw its share price crashing by 54% from 2021 highs.
- The company’s demand has dwindled as the United Kingdom reopens.
- Moreover, Royal mail encounters increased operation costs.
The Royal Mail stock has seen continued declines as the firm battles various challenges. The share price plunged to 246p, nearly 54% down from 2021’s highest mark. That saw RMG’s market capitalization declining to around 2.4B pounds.
The Thickening Plot
Royal May is a UK-based leading postal firm. It provides services such as cargo and letters. The previously government-owned company enjoyed an impressive performance during the COVID-pandemic.
The period saw the shares climbing towards the 2021 all-time highs. That had it joining the FTSE 100 prestigious club. That emerged as the firm witnessed a surge in parcel delivery amid pandemic-induced stay at homes.
The lucrative performance saw the Royal Mail joining the M&A scene. It spent over 400 million pounds in 2021 to buy the Canadian firm Rosenau. Moreover, Royal Mail issued new dividends to reward investors.
However, the narrative changed this year as Royal Mail fought numerous challenges. First and foremost, its parcel volume severely crashed in 2022. Moreover, people can now shop in stores. The company warned about a dramatic activity decline in May.
Secondly, the dwindling demand met surged cost of business operation. For instance, petrol and diesel prices have climbed by over 50% since the COVID-pandemic began. Also, the firm sees significant wage growth. Its unionized employees will likely conduct their largest strike during summer, looking for higher salaries and work guarantees.
Such developments would translate to lesser margins, impacting the company’s profitability. Moreover, the latest share price plunge left Royal Mail somewhat undervalued compared to its peers. RMG will remain under pressure until new catalysts appear.
RMG Price Prediction
RMG stock has seen price declines over the past few sessions, sliding to its current 264p from 285p. Moreover, it stays beneath the 25 and 50 MAs. The stock has printed a plunging channel. Thus, RMG can keep plunging in the upcoming weeks. Such actions will eye the target at 250.
Stay tuned for upcoming financial news.
Editorial credit: chrisdorney / shutterstock.com