Is the Royal Mail Share Price Cheap Ahead of Earnings?

Summary:
• What is the outlook of the Royal Mail share price ahead of earnings? We explain whether it is a bargain at the current price.

The Royal Mail share price has risen in the past two straight days as investors wait for the company’s trading statement. RMG is trading at 338p, which is a few points above the year-to-date low of 317p. However, the stock has been in a dramatic sell-off that has seen it drop by almost 45% from its highest point in 2021. 

Royal Mail is a leading company that delivers parcels and mail to thousands of people every day. The firm is also in the logistics business in Canada. As a result, RMG experienced a surge in demand for its services during the Covid-19 pandemic. At the time, the company saw one of its fastest annual revenue growth figures on record. 

Royal Mail has lost its momentum now that people are not relying on e-commerce as they did during the pandemic. At the same time, it is suffering as the price of fuel that it uses every day rises. Wage growth is also expected to limit its growth. The company is now expected to provide more color about its business on Thursday this week when it will publish its full-year results. 

Analysts believe that the company’s earnings will be strong while its revenue and earnings guidance will be a bit weak. Besides, the most recent data showed that online sales growth has declined dramatically in the past few months.

Royal Mail share price forecast

On the 1D chart, we see that the RMG stock price has been in a tight range in the past few months. Along the way, the stock has formed a descending channel pattern that is shown in blue. It remains below the 25-day and 50-day moving averages, which is a sign that bears are still in control. 

While a lot of weakness has been priced in already, I suspect that the Royal Mail stock price will have a bearish breakout. Besides, this channel seems like it is a bearish flag pattern. If this happens, the next key support level to watch will be at 300p. The invalidation point for this outlook is t at 350p.