The Royal Mail share price has become toxic as its downward momentum continues. The RMG stock price crashed to a 52-week low of 318p, and it seems like no buyers are collecting. This price is about 43% below its highest point in 2021. As a result, it has emerged as one of the worst-performing FTSE 350 stocks.
Royal Mail was one of the best-performing companies as demand for parcels rose during the pandemic. At the time, the firm had record sales, which pushed the management to acquire a Canadian logistics company in a $360 million deal. And to reward its shareholders, the company announced a special dividend in which it distributed $400 million to investors.
The good times did not last forever as demand for parcels has dropped sharply in the past few months. At the same time, it has seen a sharp increase in costs as prices of most items like fuel and labour have increased. Therefore, in addition to slow revenue growth, the firm is also expected to have thinner margins going forward. This explains why the Royal Mail stock price has tumbled in the past few months.
The downward trend will likely continue in the next few weeks, considering that the company does not have any scheduled events until mid-May, when it will publish its results. The company has announced another price increase of its first-class letters to offset its weakness.
I have been a bit pessimistic about Royal Mail for a while, as you can see in my past reports here and here. I warned that the stock will likely move below 300p in the coming months in these reports. This prediction has been correct as the stock has managed to move below the 25-day and 50-day moving averages. The momentum is currently with bears, meaning that the shares will likely drop below 300p soon. However, a move above the resistance at 350p will invalidate the bearish view.
This post was last modified on Apr 08, 2022, 09:14 BST 09:14