Royal Mail Share Price Drops as Workers’ Strike Looms

Summary:

Following a rebranding to International Distribution Systems, the Royal Mail share price started an aggressive push to the upside,

Following a rebranding to International Distribution Systems, the Royal Mail share price started an aggressive push to the upside, which saw its price, at one point, rise by 45 per cent within a month. However, in the past few trading sessions, the company has started to trade in a sideways market, failing to break below or above the 225p and 250p price ranges for over a week.

The company’s rebrand came months after its announcement on 20 July 2022 that it was planning to break into two separate companies to enable it to compete with other international players such as DHL, UPS and FedEx on a global scale. However, the rebrand and name change did not affect the current shareholding structure and has contributed to the latest 45 per cent rally of the past month.

However, despite the milestones above, the company is also facing challenges, with its workers starting a strike yesterday, which is expected to continue into today. There are also plans to disrupt the holiday season by the Communication Workers Union (CWU) following disagreements over a pay rise. Therefore, it is highly likely that the company may fail to take advantage of one of the year’s busiest periods, hence failing to meet its bottom line.

Royal Mail Share Price Forecast

Looking at the fundamental side of things, all signs point to a company that will continue struggling in the markets throughout the remainder of the year. The company’s workers are already on strike, with further strikes expected to be held on Wednesday, 30 November, and Thursday, 1 December.

There are also reports that these strikes will be followed by more strikes as CWU continues negotiating about a pay rise. In a period where the company is expected to be making a high turnover, the strike will derail its profitability, which will be translated into the markets.

Therefore, I expect the current horizontal trend to continue, with a high likelihood that a Royal Mail share price breakout will be to the downside. Such a breakout will see Royal Mail share price drop and trade below the 200p price level. However, a trade above 250p will invalidate my bearish lean and point to the company’s recovery.