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After a complete disaster of a 2018, its bright first half proving to be a false dawn, Royal Mail shares (LSE:RMG) have struggled in 2019, unable to attract investors to its cause.

Opening at £2.68, it had climbed above £3 by late-January, only to slump to a record low of £2.32 by the end of March.

A rebound back above £2.60 then proved to be short-lived, with the Royal Mail share price today at £2.40.

More about Royal Mail:

The tentative optimism that had helped drive the stock higher across much of January came crashing down following its New Year trading update, one that caused Royal Mail to shed almost 14% in a single session. Though underlying group revenue for the 9 months to December 23rd managed to inch up by 2%, with a 1% decline at UKPIL compensated for by the 8% increase at GLS – a now routine split – its outlook for this year and the next was pretty dreary.

Adjusted operating profit before transformation costs is now expected to come in between £500 million and £530 million, £20 million lower than its previously stated guidance, and a huge way-off last year’s £694 million. With the company continuing to feel the impact of GDPR, letter volumes are set to be down 7-8% for 2019, and ominously outside the ‘medium-term range’ next year in 2020.

The company might be able to provide a short-term stock price rescue if its adjusted operating profit at least arrives at the top end of estimates. But even then, something slightly more substantial is going to be required to prevent these record lows becoming its normal trading band.

Royal Mail shares have a consensus rating of ‘Hold’ alongside an average target price of £3.29.

This article is brought to you in association with Spreadex. All opinions expressed in this article are from the author and do not necessarily represent the opinions of The Armchair Trader. You can find out more about Spreadex products and services here, or find more articles from Connor Campbell here.

Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Connor Campbell

Connor Campbell

Connor joined Spreadex in 2014 as part of a newly expanded financial analyst team after graduating from the University of Southampton with an MA in English. His focus is on providing Spreadex's customers with up-to-date and informative news, and is responsible for the market analysis found on the Spreadex website.

Connor produces three daily market updates, a daily stock earnings preview, a weekly financial market preview piece every Friday, a round-up of all the big financial stories making the weekend press every Monday morning and regular stock market features.


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