Royal Mail share price crashed to an important support level as concerns about the company rose. The RMG stock dropped to a low of 261p, which was the lowest level since August 10 of this year. This price is about 57% below the highest level in June last year. Its market cap has plummeted to about 2.5 billion pounds.
InvestingCube's S&R Levels
Not in Sell Zone
RMG is fighting multiple battles
Royal Mail Group is a leading postal company that was started in 1516 by King Henry VIII. The company delivers letters and parcels in the UK and other countries. After experiencing substantial growth during the pandemic, Royal Mail’s business has faced numerous challenges recently.
The company’s demand waned as the UK ended its lockdowns. As a result, people started shopping in stores again, leading to a sharp decline of e-commerce sales. At the same time, the company has had to contend with the soaring cost of doing business as wages and energy prices escalated.
Now, the company is expected to face more headwinds as its staff go a major strike. The staff has planned to strike for four days as a dispute on wages escalated. In a recent statement, the firm said that it will sustain a full-year loss if the strike goes on. It will start on August 26 and 31 and on September 8 and 9. Workers have protested the 2% wage increase considering that inflation has jumped by 10%.
Royal Mail’s other initiatives are expected to lead to higher cost of doing business. For example, the firm said that it will start collecting doorstep parcels for free this year. The service, known as Parcel Collect, will help the company boost its market share in e-commerce. But it will also be an expensive process since the workers will need to be paid.
Royal Mail share price forecast
The daily chart shows that the RMG share price has been in a strong downward trend in the past few months. A closer look reveals that the stock has found a strong support at 258p and moved below the 25-day and 50-day moving averages. The Stochastic Oscillator has also tilted lower.
Therefore, this is a do-or-die moment for the Royal Mail stock price. A move below the support at 258p will open the possibility of the shares falling to the next psychological level at 200p. This view will become invalid if it rises above 280p.