Royal Mail Share Price Forecast August 2021 – Time to Buy RMG?

Shares of British multinational postal service and courier company Royal Mail Group (LSE: RMG) have not performed well over the week which has been attributed to its recently released trading update. Does the fall in RMG share prices mean a buying opportunity for investors? Let’s find out.

Royal Mail – Technical Analysis

According to Royal Mail’s financial statement, the market cap of the company is at £5.039 billion with total assets worth 9.958 billion. The revenue for 2020 was at £12.64 billion with a profit margin of 4.91%, up from $10.84 billion in 2019. RMG shares are now trading at £505.2 at the time of writing(August 03 11:21 UTC+1)

Oscillators for Royal Mail such as Stochastic RSI Fast (3, 3, 14, 14)(35.1), Williams Percent Range (14)(−90.6), Bull Bear Power(−35.3) and Ultimate Oscillator (7, 14, 28)(39.3) are all pointing towards neutral. On the flip side, moving averages such as Exponential Moving Average (50)(544.9), Simple Moving Average (50)(567.3), Exponential Moving Average (100)(522.9) and Simple Moving Average (100)(538.7) are all pointing towards selling.

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Recent Developments

Established back in 1516, Royal Mail Group provides mail collection and delivery services throughout the United Kingdom. The government which initially retained a 30% stake in Royal Mail sold its shares in 2015 which ended 499 years of state ownership. Many accused the company of being undervalued when its share prices grew by 38% on the first day of conditional trading. Its market price peaked as high as 87% six months later.

The biggest news coming out of Royal Mail is last month’s trading update which their management team released. Royal Mail’s first-quarter revenue increased by 12.2% compared to a year ago to £3.16 billion. This growth was attributed to the company’s relatively new focus on its parcels delivery service. Royal Mail’s gross income from its letter delivery service increased by 25.7% to £934 million compared to 2020. However, this is still 7% lower than pre-pandemic levels.

However, there is a growing level of uncertainty surrounding Royal Mail’s parcel delivery volumes, despite rising income levels. Consumers have started shifting away from online shopping as brick and mortar retail shops are reopening. Royal Mail’s parcel delivery growth streak might end soon if this trend continues. Royal Mail has already felt this pressure, as its parcel delivery volumes fell by 13% compared to a year ago, which may be the primary reason for its share price decline.

Should You Buy RMG Shares?

The decline in the volume of parcels is not a good sign for any investor interested in Royal Mail. However, they must note that comparing the present period to 2020 is skewed as the U.K was in complete lockdown for most of last year. Consumers relied on e-commerce to get their non-essential items. However, comparing the figures to that of 2019 reveals that parcel volumes increased by 19%. This can be an indication of a potential trend of the prominence of online shopping as the dominant retail option going forward.

With the pandemic being far from over, it’s too soon to predict whether the rise in parcel deliveries over the last two years will continue after COVID stops influencing the economy. However, many analysts believe that the adoption of e-commerce has been accelerated thanks to the pandemic. Both the volume and share prices are expected to climb higher over the long term despite short-term declines in volume. Therefore, the recent dip in Royal Mail share prices can be an excellent buy opportunity for many investors.

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