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Royal Mail share price: UBS slashes valuation on postal operator

UBS has chopped its price target on Royal Mail Group (LON:RMG), arguing that competition from Amazon is keeping a lid on parcel prices, Proactive Investors reports. The comments mark another blow for the mid-cap company after Deutsche Bank warned last week that its dividend was ‘unsustainable’.

Royal Mail’s share price has climbed higher in London in today’s session, having added 1.22 percent to 274.60p as of 14:42 GMT. The shares are outperforming the FTSE 250 which is currently 0.87 percent better off at 18,814.26 points.

UBS trims price target

UBS lowered its price target on Royal Mail from 354p to 282p today, while maintaining its ‘neutral’ rating on the shares. Proactive Investors quoted the analysts as commenting that they believed that “part of the reason why UK parcel prices are not rising […] is partly down to the number of competitors in the market”. The broker separately noted that Amazon’s delivery service was much cheaper than Royal Mail for parcels over 2kg in weight.

“We believe that in order to become competitive with [Amazon] (and its peers) at heavier parcel weights RMG will need to find ways of reducing its cost of parcel fulfilment,” UBS pointed out. The analysts, however, reckon that the privatised postal operator still has the best reach of any UK delivery company, with 99.9 percent of the population within 30 minutes’ drive of a Royal Mail delivery facility.

Other analysts on group

The 17 analysts offering 12-month price targets for Royal Mail for the Financial Times have a median target of 300.00p on the shares, with a high estimate of 410.00p and a low estimate of 180.00p. As of February 9, the consensus forecast amongst 18 polled investment analysts covering the blue-chip group has it that the company will underperform the market. 

As of 15:13 GMT, Monday, 11 February, BT Group plc share price is 274.60p.

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