The Royal Mail share price has been in a major sell-off in the past few months as concerns about the company’s growth remain. The RMG stock has dropped to about 367p, which is about 32% below the highest level this year, meaning that it has moved to bear territory. Its market value has crashed to about 3.51 billion pounds.
Royal Mail is facing a perfect storm. First, demand for parcels is expected to dwindle in the next few months as the country’s economy reopens and people go back to shopping in stores. This is contrary to what happened during the Covid-19 pandemic as more people shifted to shop online. As a result, the company’s business boomed, leading to substantial revenue and profitability growth.
Second, the company is seeing a substantial cost increase as labour and energy costs continue increasing. Data published last week revealed that UK wages jumped by more than 5% in January, and analysts expect the situation to continue this year. At the same time, the cost of fuel prices has risen sharply in the past few days.
On Monday, the price of petrol rose to a record high of 167p. These prices will likely keep rising in the near term as the crisis in Ukraine escalates. In a recent note, analysts at Credit Suisse said: “Despite company commentary indicating otherwise, our analysis suggests Royal Mail has lost share of the UK parcel market, which we do not think is widely appreciated and is a cause for concern.”
Royal Mail share price forecast
The daily chart shows that the RMG share price has been in a deep downward trend in the past few weeks. The key level was when the price moved below the support level at 380p. It has also moved below the 25-day and 50-day moving averages and a key support level.
An important aspect is that stock has formed a break and retest pattern by moving to the key point at 380p. This pattern can also be seen as a bearish flag pattern. Therefore, there is a likelihood that the stock will likely keep falling as bears target the next key support at 300p.