The Royal Mail share price has been struggling to get back to its feet. It was trading at its highest point in two weeks on Wednesday. The stock was up by more than 1.35% to 509.4p and 46% above its lowest level this year in January.
RMG’s Fundamental Analysis
Royal Mail Group Plc (LON: RMG) is the lead parcel delivery company in the United Kingdom. It is closely followed by Hermes. Its total market capitalization currently stands at £5.08 billion.
Since the onset of the coronavirus pandemic in 2020, the volume of letters sent dropped substantially as people turned to e-commerce. As a result, RMG’s share price took a nosedive and has been struggling to recover ever since.
However, according to some analysts, the resurgence of coronavirus caused by the highly infectious Delta variant might be a blessing in disguise. Despite a decline in parcel volumes, analysts are optimistic that the stock’s price could increase. With the strict lockdown restrictions in the UK, online deliveries are expected to spike as people opt to remain indoors.
According to data published on July 21, the Royal Mail’s revenue for the second quarter grew 12.5% compared to 2020 and by 20.2% compared to 2019. The company is optimistic that its revenue growth will continue, albeit at a slower pace.
RMG’s Technical Outlook
On the four-hour chart, the Royal Mail share price formed a descending channel since mid-July. It is trading nearly 17% below its highest level this year on June 7. It hit an intraday low of 500p before bouncing back.
The price is below the 50-day exponential moving average at 514.8p and the 100 at 530.6p, reinforcing the negative sentiment.
Its Relative Strength Index (RSI) turned higher after consolidating in the oversold readings for some time. Its current RSI stands at 55 indicating that the price might have found some technical support.
However, if it remains below the two moving averages, RMG’s outlook will remain weak. It could decline to 480.6p. On the flip side, a recovery in RMG’s share price will invalidate the bearish view. The next target level for the bulls will be at 540p.