Financial Trading Blog

Stock of the day 13/07/2016 – Royal Mail PLC



What will Royal Mail deliver with its first quarter trading statement next Tuesday?


After overcoming the same rocky start to 2016 as the rest of the markets Royal Mail saw something of an uninterrupted rise between mid-February and the end of June, climbing all the way to £5.49 on the eve of the UK’s EU referendum results. That’s the best price Royal Mail has seen in over 2 years, and was only 55p away from the highs the stock struck in the few months after its October 2013 IPO. Yet, as is a well-worn tale by now, the Brexit result hit stocks hard, Royal Mail itself plunging 13% (to £4.66) across 2 trading sessions. Since then the stock has largely traded in line with the wider market movements, and now sits at a current trading price of £5.00 (IT-Finance.com, 13/07/2016).

Royal Mail PLC Chart July 2016 Spreadex Financial Spread Betting
(Source: IT-Finance.com 13/07/2016)

Much of Royal Mail’s rise was fuelled by a pair of strong updates. In January the company reported a 6% increase in parcel volumes for the Christmas period, with a 4% jump in volumes for the 9 months to the end of December; the letters division was less healthy, falling 3% across that 9 month period as people continued to opt for email over the more old-fashioned method of communication.

May’s full year report continued this mixed trend, the figures initially causing a slump in the company’s stock price before seeing a more sustained rally in the week that followed. Adjusted group revenue fell 1% to £9.25 billion, while pre-tax profit plunged 33.3% to £267 million; however, a 5% rise in dividend to 22.1p eventually helped soothe investors’ concerns, as did the robust growth in its European parcels business GLS (where volumes jumped by 10%).

Of course with its first quarter statement next week the company will be forced to comment on the dreaded B-word, while investors will be keen to see if an improvement in parcel volumes can continue to mitigate the seemingly never-ending decline in letter volumes.

Royal Mail PLC has a consensus rating of ‘Hold’ with an average target price of £4.84.


MARKET ANALYSIS

RECENT POSTS

DISCLAIMER


Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 64% of retail investors lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. For professional clients, spread betting and CFD trading can also result in losses larger than your initial stake or deposit.

Spreadex Ltd is authorised and regulated by the Financial Conduct Authority, provides an execution only service and does not provide advice in any way. Nothing within this update should be deemed to constitute the provision of investment advice, recommendations, any other professional advice in any way, or a record of our trading prices. This update does not constitute or form part of an offer of, or solicitation for a transaction in any financial instrument, nor shall it or the fact of its distribution form the basis of, or be relied on in connection with, any contract therefore. Any persons placing trades based on their interpretation of the comments or information within this update does so entirely at their own risk.

No representation, warranty, or undertaking, express or limited, is given as to the accuracy or completeness of the information or opinions contained within this update by Spreadex Ltd or any of its employees and no liability is accepted by such persons for the accuracy or completeness of any such information or opinions. As such, no reliance may be placed for any purpose on the information and opinions contained within this update.

The information contained within this update is the intellectual property of Spreadex Ltd and is protected by UK and International copyright laws. All rights reserved. Users may however freely download, distribute and reproduce extracts of the contents, subject always to accrediting Spreadex Ltd as the source and providing a hyperlink to www.machibet77.com.