The Royal Mail share price is bouncing back as investors reflect on the company’s earnings and ongoing transformation. The RMG stock price jumped to a high of 288p, which was the highest level since June this year. It has risen by 10% from its lowest level this year. However, this price is significantly lower than its all-time high.
Is RMG a good investment?
Royal Mail is changing as its business faces significant headwinds. The company has seen its business struggle in the past few months as demand for letters and parcels has plateaud. For example, data published this week showed that revenue dropped by 5.1%, from £3.15 billion to about £2.99 billion in the three months to June.
Its parcel revenue dropped by 15.1% because people no longer shop online as they did two years ago. At the same time, letters volume declined from £934 million to about £871 million. The only bright right was GLS, whose revenue rose from £1.039 billion to about £1.12 billion. In the statement, the company said that it was seeing a sharp decline in its activity. The CEO said:
“We have made progress building the infrastructure we need for Royal Mail to compete, especially given the growing demand for more larger parcels, delivering the next day – including Sundays – and in a more environmentally friendly way.”
The Royal Mail share price also rose after the company announced a change of name. It will be known as International Distributions Services (IDS). The name change is a reflection of the fact that the firm is now an integrated delivery company. It also said it could separate its underperforming businesses.
Royal Mail share price forecast
The four-hour chart shows that the RMG stock price has been in a strong bullish trend in the past few days. The shares have managed to rise by about 10% from the lowest point this year. It has managed to move above the 25-day and 50-day moving averages. At the same time, it has retested the upper side of the descending channel shown in blue. As a result, the Relative Strength Index (RSI) has moved close to the overbought level.
Therefore, the Royal Mail share price will likely keep rising if buyers are able to move above the upper side of the descending channel. If this happens, the next key resistance level to watch will be at 310p. A drop below the support at 275p will invalidate the bullish view.