JPMorgan Cazenove has trimmed its valuation on Royal Mail Group (LON:RMG), staying cautions on the postal operator, WebFG News reports. The move came after the blue-chip group updated investors on its recent performance this week, posting a small rise in overall revenue for the first three months of its financial year, while revealing a revenue drop at its UK letters and parcels business.
Royal Mail’s share price has gained ground in today’s session, having added 1.03 percent to 472.30p as of 13:36 BST. The stock is outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.23 percent higher at 7,694.25 points. Royal Mail’s shares have added a little over 18 percent to their value over the past year, as compared with about a 3.5-percent gain in the Footsie.
JPMorgan Cazenove lowered its price target on Royal Mail from 561p to 537p yesterday following the group’s first-quarter update earlier in the week. WebFG News quoted the analysts as saying that the results suggested a relatively stable backdrop, with any GDPR-related impact appearing modest year-to-date, such that letter revenue was down a manageable five percent year-on-year, excluding elections.
That being said, the broker remains cautious and reckons letter trends could still deteriorate from here.
“We would also note that GDPR has only been in effect for circa 1/3 of the period covered by the Q1 trading update, such that any impact may be more pronounced in future periods,” JPMorgan pointed out, as quoted by the newswire.
Analysts at Hargreaves Lansdown also pointed to the impact of the GDPR rules, noting that they are reducing the number of direct mailings, which is bad news for Royal Mail.