Related Articles
In the last year, the Royal Mail PLC (LON:RMG) (RMG.L) share price has declined by around 56%. That’s clearly a hugely disappointing performance for the company’s investors, and shows that they are generally uncertain about its future prospects.
In my opinion, the short term could continue to be challenging for the business. Its UK Letters division has been in decline for some time, with consumers now increasingly preferring e-mail and obtaining electronic copies of documents for environmental reasons rather than a letter in the post.
Therefore, it wouldn’t surprise me if the UK Letters divisions continues to act as a drag on the company’s financial outlook – even though it is attempting to improve the efficiency of the division.
Over the long run, though, I believe that Royal Mail could benefit from the growth opportunities it has internationally. Its international operations have recorded encouraging performance relative to its UK divisions in recent quarters. As the company’s international focus becomes an increasing part of its overall business, it could have a greater impact on its financial performance.
Further, rising demand for parcel delivery as e-commerce grows in popularity may provide Royal Mail’s UK Parcels division with a growth catalyst that helps to offset the slowdown in its UK Letters division to some degree.
That said, it could take time for that to transpire. In the meantime, investor sentiment towards the stock is weak. This trend may continue over future months, which could lead to additional pressure being placed on the stock.
Therefore, while I think the Royal Mail share price could have long-term turnaround potential, I’d rather wait for further news from the business regarding its performance before becoming more positive about it. The challenges it faces in its UK Letters division could cause investors to adopt a continued cautious attitude towards the stock which ultimately causes it to lag the FTSE 250 in the near term in my view.
Source link
