Royal Mail (LON: RMG) share price crashed to the lowest level since November 2020 as concerns about the company remained. The stock plummeted to 257p, which was about 57% below its all-time high of 617p. The decline brings the company’s market cap to over 2.5 billion pounds.
Royal Mail strike
Royal Mail Group has had a difficult time in the past few months as concerns about the company’s growth continue. The firm has seen the cost of doing business rise due to the rising energy prices and wage growth.
At the same time, the company is seeing a sharp decline in demand as the volume of parcels and letters decline. The most recent results showed that the company’s revenue dropped from £3.1 billion to £2.99 billion. This drop was attributed to the Royal Mail segment whose revenue fell to £1.88 billion. Its GLS revenue rose to £1.1 billion.
The plot is now thickening for Royal Mail considering that workers have planned a series of strikes in August and September. The Communication Workers Union has scheduled strikes on August 26 and 31st and then on September 8 and 9.
In a statement, the company said that it will face material losses if the strikes go on. It blamed the union for not negotiating in good terms with the company. The union has rejected a pay award worth up to 5.5%, which would add over £230 million to operating costs.
All this is happening at a time when demand is slowing due to the rising inflation. Recent data by the Office of National Statistics (ONS) showed that the country’s inflation rose to 9.4% while retail sales dropped sharply.
At the same time, the proportion of online sales has dropped sharply as evidenced by the recent weak results by Ocado. This will affect the company’s revenue because of its strong presence in the e-commerce delivery business.
Royal Mail share price forecast
The daily chart shows that the RMG share price has been in a strong bearish trend in the past few months. This drop culminated to a move below the support at $258, which was the lowest point this year. It has moved below the 25-day and 50-day moving averages while the MACD has moved below the neutral point.
Therefore, the path of the least resistance for the Royal Mail stock price is lower, with the next key support being at 200p.
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