Analysts argue that Royal Mail Group (LON:RMG) could see a rise in marketing mail revenue, City A.M. reports. The news comes ahead of the privatised postal operator’s upcoming results on Thursday, which will mark the first update since the company announced a change at the top, with chief executive Moya Greene set to be replaced by GLS boss Rico Back in September.
Royal Mail’s share price rallied on Friday, adding 3.21 percent to close at 631.00p. The stock outperformed the broader London market, with the benchmark FTSE 100 index adding 23.58 points to end the session 0.31 percent higher at 7,724.55, posting its longest winning streak in nearly 13 years.
Marketing mail prospects
City A.M. quoted analysts at Liberum as commenting that following reports of Royal Mail promoting its unaddressed mail service as a way round upcoming General Data Protection Regulation (GDPR) rules, the privatised postal operator could see an increase in companies switching to more traditional forms of marketing to work around regulations.
“We believe the operational gearing is high, given the effectively fixed cost base of the universal network,” the broker’s analyst Ian Whittaker commented, as quoted by the newswire, while also flagging concerns of a potential downside to a massive increase of marketing mail.
“The risk is that higher volumes would trigger a consumer and political backlash that could lead to tighter regulation,” the analyst pointed out.
Liberum Capital reiterated its ‘sell’ rating on Royal Mail last week, without specifying a price target on the shares, while Credit Suisse continues to see the company as an ‘underperform’. According to MarketBeat, the FTSE 100 group currently has a consensus ‘hold’ rating and an average price target of 466.25p.