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Royal Mail share price has been in a strong sell-off as the company’s outlook worsened. The stock crashed to a low of 218p last week, which was the lowest level since November 2020. It has collapsed by about 60% from its highest point in 2022, giving it a market cap of over 2.2 billion pounds.
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Why has RMG stock collapsed?
Royal Mail share price had a spectacular performance during the Covid-19 pandemic. At the time, the stock soared to an all-time high as the postal company’s demand soared as people embraced e-commerce. All this culminated in the company’s entry into the prestigious FTSE 100 index. Also, the firm offered a special dividend in 2021.
Recently, however, the removal of Covid restrictions changed the company’s outlook. Demand for parcels plummeted, which affected the company’s total revenue and profitability. The fall in demand coincided with a situation when the company’s costs surged. As a postal company, oil and gas prices are important costs. And in the past few months, they have risen to their highest points on record.
At the same time, Royal Mail share price dropped because of the company’s rising human resources costs. In the past few months, the company’s employees have been protesting their wages. As a result, the company’s management has warned that these wages will lead to a big loss this year.
In the most recent quarter, the company’s total revenue dropped from over 3.14 billion pounds to about 2.99 billion pounds. The only positive figure was from its GLS division, whose revenue rose from 1.03 billion pounds to 1.12 billion. Unfortunately, the situation will continue worsening this year.
Royal Mail share price forecast
The weekly chart shows that the RMG share price has been in a strong bearish trend in the past few months. Its stock has managed to move below the important support at 78.6% Fibonacci Retracement level. It has also fallen below the 25-week and 50-week moving averages while the Relative Strength Index (RSI) has fallen below the oversold level.
Therefore, Royal Mail shares will continue falling as sellers target the next key support level at 200p. A move above the resistance point at 235p will invalidate the bearish view.
