- Summary:
- The Royal Mail share price declined sharply after publishing its quarterly results. We explain why it could decline further soon.
The Royal Mail share price crashed by more than 2.8% on Wednesday after the company published its quarterly earnings report. The RMG stock ended the day at 515p, which was about 15% below the highest level this year.
Royal Mail news. The company made headlines on Wednesday when it released its quarterly results. The firm said that its revenue rose by 12.5% in the first quarter compared to the same quarter last year. Its parcel revenue increased by 3.4% while addressed letter volumes rose by 22%. The total letter revenue rose by 25.7%. Meanwhile, its GLS business saw revenue growth of 12.4% while its volume rose by 10%.
In a statement, the company said that its domestic parcel volume was relatively strong and that it appeared to be re-basing at a higher level than pre-Covid. The statement added:
“We continue to expect fluctuations in volumes as we emerge from COVID restrictions, which we will need to manage accordingly. Nonetheless, we are encouraged by the revenue performance across Royal Mail and GLS in the first quarter.”
Meanwhile, the Royal Mail share price will be in focus after reports that the firm is about to axe its signed-for parcels and its Saturday letter deliveries. This is part of a plan by Simon Thompson, the company’s new CEO. Still, this process will not be easy since it will require a change to the law that governs the firm’s responsibilities.
The RMG share price declined after earnings because analysts and investors expect that this growth will start slowing down as the economy reopens. So, what next for the stock?
Royal Mail share price forecast
In my July estimate for the RMG shares, I noted that there was a possibility that the stock would bounce back. This prediction was wrong since the stock declined sharply. This was in line with my follow-up article on the company.
Now, looking at the four-hour chart, we see that the company’s shares have declined sharply recently. It has even moved below the lower line of the descending channel and the 50-day and the 100-day moving averages. In fact, the two averages have made a bearish crossover. It has also formed a small head and shoulders pattern.
Therefore, I suspect that the bearish trend will persist as many investors start taking profits. If this happens, the next reference point will be 480p, which was the lowest level on April 1. It is about 7.7% below the current level. On the flip side, a move above 540p will invalidate this view.
RMG shares chart
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