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The share price performances of easyJet plc (LON:EZJ) (EZJ.L), Imperial Brands PLC (LON:IMB) (IMB.L) and Royal Mail PLC (LON:RMG) (RMG.L) have been very disappointing over the last couple of years.
For instance, Imperial Brands’ share price now trades at around 1800p having been as high as 4000p three years ago. During that time, investors have become increasingly downbeat about the prospects for the tobacco industry as volume declines and uncertainty regarding regulations have persisted.
This trend may continue in the short run in my view. Imperial Brands’ recent disappointing trading update showed that its defensive appeal has waned over the last few years. Although I still think e-cigarettes and reduced-risk products could offer long-term recovery potential, I feel the stock could experience further volatility in the short run.
Likewise, I am of the view that easyJet has a sound long-term outlook. The company has a dominant position in the European budget airline sector, which could be a fast-growing segment in the long run.
The challenge facing easyJet, though, is that consumer sentiment is weak and there has been a period of oversupply in the industry. Still, with the business having a solid balance sheet to my mind, as well as a sound strategy on costs, I think it could emerge in a strong position from a period of difficulty.
Royal Mail’s prospects are challenging at the moment. Its UK Letters division is continuing to weigh on its financial performance. This is likely to continue over the medium term in my view, and could undo much of the good work the business is doing in its Parcels division and internationally.
Fundamentally, I think Royal Mail could struggle over future quarters due to the negative impact of declining demand for letters in the UK. But with its international expansion likely to continue, I feel that over the long run the stock may eventually generate growth if it is able to avoid the grasp of a Labour government after the next general election.
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