After hitting a multi-year high of roughly 606p in June, the Royal Mail share price (LSE: RMG) has dropped sharply. Shares of the company have dropped by a massive 30 percent since that time.
Long-term prospects look promising
On May 20, 2021, Royal Mail PLC announced annual earnings per share of 51.90 for 2021. Among the 14 experts who have projected the company’s price for the next year, the median target is $637.50, with the lowest estimate being $440.00. Working with the median estimate as the target, it means that the share price will rise by about 51% from its last closing price of $422.1
Share price could spike as Christmas approaches
Despite growing costs due to the pandemic-driven surge in box delivery from online shopping, the company anticipates H1 profits to improve. In the latest earnings report, the company reported an 8.2% increase in five-month revenue to £5.1 billion.
While businesses in the UK are reopening following months of lockdowns, the quantity of packages being delivered has decreased. Nonetheless, the company expects brisk business as we approach the Christmas season and has already announced intention to hire 20,000 temporary workers to help speed up parcel delivery during that season.
Technical analysis for Royal Mail share price
RMG share price is has been on a reversal over the past 5 sessions, following a one –week period of ranging. The share price broke through the previous resistance level at 414.0 on 13th October and the price has since remained within the ascending channel as shown on the chart below. The RSI is at 36, which shows weak momentum.
The weak momentum could see the bears establish the support at 404.2, beyond which further slips could see the price below the psychological support of 400. On the upside the first resistance is likely to be at 425.7. For the price to climb above the ascending channel, the market will have to respond positively to the RSI which is currently heading, towards the oversold territory. This would require a fightback by the bulls, which could push the price to the second resistance at 436.8.
