Royal Mail share price: UBS trims valuation on stock

Analysts reckon group still not worth buying but dividend looks safe

Royal Mail share price: UBS trims valuation on stock

UBS has lowered its price target on Royal Mail Group (LON:RMG), arguing that despite the steep fall in shares, it sees better value elsewhere, Proactive Investors reports. The move came after the privatised postal operator warned on profits about a week ago, causing the shares to plunge.

Royal Mail’s share price has fallen into the red in today’s session, having given up 0.52 percent to 343.20p as of 13:39 BST. The stock is marginally outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.76 percent lower at 7,263.22 points. The group’s shares have given up just under 10 percent of their value over the past year, as compared with about a 3.4-percent dip in the Footsie.

UBS trims valuation on Royal Mail

UBS, which has a ‘neutral’ rating on Royal Mail, lowered its price target on the shares from 528p to 354p today, following last week’s selloff in the postal operator’s shares. Proactive Investors quoted the broker as saying that while the shares were not expensive at the current price, it saw better value elsewhere.

“Given the extent of the disappointment in the trading update (UK productivity +0.1% versus targeted 2-3%) we believe a rebuilding process will be required before the market can start to become comfortable as to what level of cost-cutting (and therefore long-term margin) is sustainable,” the analysts pointed out, adding, however, that Royal Mail’s dividend yield of around seven percent was ‘reasonable,’ and that they saw “limited risk to the dividend in the short-term”.

Other analysts on postal operator

The 16 analysts offering 12-month price targets for Royal Mail for the Financial Times have a median target of 455.00p on the shares, with a high estimate of 630.00p and a low estimate of 250.00p. As of October 5, the consensus forecast amongst 17 polled investment analysts covering the blue-chip group has it that the company will underperform the market. 

As of 13:54 BST, Monday, 08 October, Royal Mail share price is 344.30p.

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