Royal Mail share price drops as Berenberg flags GDPR costs

Analysts lower stance on privatised postal operator

Royal Mail share price drops as Berenberg flags GDPR costs

Shares in Royal Mail Group (LON:RMG) have lost ground in London this morning, as analysts at Berenberg lowered their rating on the stock, amid prospects for costs related to the General Data Protection Regulation (GDPR) which comes into force today. The move follows the postal operator’s recent full-year results.

As of 09:37 BST, Royal Mail’s share price had lost 2.82 percent to 530.00p. The shares are underperforming the broader UK market, with the benchmark FTSE 100 index having climbed into positive territory and currently standing 0.32 percent higher at 7,741.61 points.

Berenberg trims stance on Royal Mail

Berenberg lowered its rating on Royal Mail to ‘sell’ today, without specifying a price target on the shares. City A.M. reported that the analysts had estimated that the changes related to the GDPR will see £80 million sliced off the company’s revenues.

“We think the risks to Royal Mail’s growth and profitability outlook are increasing once again. Regulatory change presents another headwind for mail volumes, while intense competition threatens revenue growth in parcels,” the broker’s analyst Joel Spungin explained, as quoted by the newswire. “Combined with various other cost pressures, we see little profit growth over the next three years.”

The comments came after Royal Mail recently warned in its full-year results that the ongoing decline in  addressed letter volume was expected to come in at the higher end of the anticipated four-to-six-percent range for the  2018-19 year due to the introduction of GDPR.

Other analysts on postal operator

Sanford C. Bernstein, which sees Royal Mail as a ‘market perform,’ boosted its price target on the shares from 540p to 590p this week. According to MarketBeat, the FTSE 100 company currently has a consensus ‘hold’ rating and an average price target of 474.67p.

JPMorgan meanwhile trimmed its stance on the privatised postal operator this week, citing ‘lack of positive catalysts’.

As of 10:02 BST, Friday, 25 May, Royal Mail share price is 529.80p.

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