JPMorgan has trimmed its price target on Royal Mail Group (LON:RMG) but remains bullish on the company, arguing that it is ‘partially shielded’ by the ongoing e-commerce growth. The comments are a boost for the postal operator whose shares were sold off last week following downbeat remarks at UBS.
Royal Mail’s share price inched 0.38 percent higher to close at 416.07p yesterday, largely in line with gains in the broader UK market, with the benchmark FTSE 100 index adding 19.11 points to end the session 0.26 percent higher at 7,370.03. The postal operator’s shares have lost more than 14 percent of their value over the past year, and are down by some 10 percent in the year-to-date.
JPMorgan Cazenove reiterated its ‘overweight’ rating on Royal Mail yesterday and lowered its price target on the stock from 565p to 550p, noting that the postal operator was ‘partially shielded’ by the ongoing growth in e-commerce and an apparent moderating in Amazon’s in-sourcing and reduction in export volume pressures in light of the weaker pound.
“In UK parcels, the market is skewed toward lighter average weights (up to 2kg) - the sweet spot for RMG’s core network with larger items served by Parcelforce,” the analysts pointed out, as quoted by Sharecast. “We believe these factors, along with stronger account and tracked product growth, underpinned RMG’s decision to upgrade its addressable market growth outlook in May.”
The comments came after UBS turned bearish on Royal Mail last week, flagging concerns over the group’s parcel volumes.
For the full year, JPMorgan Cazenove expects UK parcel volume growth of 2.7 percent, up from 2.6 percent, also noting slightly weaker first-half comparatives, with first quarter volumes seen growing 3.5 percent. Royal Mail is scheduled to update investors on its recent performance on July 18.