IDS share price staged a comeback: Is Royal Mail a good buy?
IDS (LON: IDS) share price popped by more than 6% on Monday as investors focused on the latest Royal Mail strike news. The stock rose to a high of 206.50p, which was the highest point since mid-October. It remains down by about 60% this year.
Royal Mail strike updateCopy link to section
International Distributions Services is the new name of Royal Mail Group. It is the holding company of Royal Mail and General Logistics Systems (GLS). GLS is an Amsterdam-headquartered company that delivers parcels and other items. It also owns Rosenau, a Canadian logistics company that Royal Mail acquired in 2021.
Royal Mail Group changed its name to IDS as the company continued weighing separating the two companies. The management and some investors believe that separating the two firms will create value for shareholders by preventing cross-subsidies. This is a situation where GLS helps to fund Royal Mail’s bloated workforce.
Still, analysts and Royal Mail’s union believe that such separation will not happen and that it does not make sense. They argue that GLS also benefits substantially from Royal Mail’s infrastructure in the UK.
IDS share price rose sharply on Monday after Royal Mail’s employees halted their strikes. This happened after the company challenged the validity of ballots involving about 115k members of the union.
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Royal Mail employees have been staging persistent strikes in the past few months to complain about low pay. As a result, the firm has warned that it will sink to a loss this year. It also warned that it will begin slashing 10k jobs due to low demand and strikes.
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The IDS share price also rose after the UK government said that it will not prevent Daniel Kretinsky from buying more Royal Mail shares. Kretinsky is a Czech billionaire who owns EPH, the biggest energy group in Central Europe.
IDS share price forecastCopy link to section
The daily chart shows that shares of Royal Mail parent company have been under pressure lately. These shares remain below the important level at 244p, which was the lowest level on June 30th. The stock remains below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has formed a bearish divergence pattern.
Therefore, the IDS share price will likely resume the bearish trend as growth and profitability concerns remain. If this happens, the key support level to watch will be at 176p.
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