The Royal Mail share price is hovering near its highest level since 2018 as investors remain optimistic that its growth will continue. The stock has also surged after a recent rate upgrade by Citi analysts and the possibility that it could join the FTSE 100.
Royal Mail news: In a note yesterday, analysts at Citi said that the stock was worth about 1,000p, which is about 50% above where it is today. The company’s analysts recommended the stock as a buy in April last year when it was selling off as the pandemic started. Since then, the stock has more than doubled as the company’s business has jumped. Just last week, analysts at JP Morgan reiterated their buy thesis on the company’s shares. Analysts at Citi noted:
“We upgraded the stock in April 2020 on the hoped-for acceleration in parcel volumes and in November we argued for the potential for a pricing increase in parcels.”
The Royal Mail share price also rose on speculation that it could be promoted from FTSE 250 to FTSE 100. This is important because if the company enters the FTSE 100, it will force ETFs that track the index to buy the shares. Other companies that could move to the FTSE 250 are Moonpig, Auction Technology Group, and Trustpilot Group.
The biggest concern for Royal Mail is that its growth could slow soon as the UK economy reopens.
The weekly chart shows that the RMG share price has risen by almost 400% from its lowest level in 2020. The shares are approaching the important resistance at 635, which was the highest point in May 2018. It is being supported by the 25-week and 50-week moving average and it recently moved above the important resistance at 531p.
Therefore, there is a possibility that the stock will continue rising as bulls target the next resistance at 635p. However, a drop below 531p will invalidate this trend.
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