https://investomania.co.uk/2019/03/will-the-royal-mail-plc-share-price-ever-recover-after-57-fall-in-one-year/Will the Royal Mail PLC share price ever recover after 57% fall in one year?Can Royal Mail PLC’s (LON:RMG) (RMG.L) share price deliver a turnaround?
March 29, 2019 Robert Stephens
Royal Mail (LON:RMG)
Things keep getting tougher for the Royal Mail PLC (LON:RMG) (RMG.L) share price. While the FTSE 100 and FTSE 250 have made gains since the start of the year, it has continued to fall. It is now down by 57% over the last year, with it having shown little sign of mounting a successful recovery.Difficult outlook
Of course, the profit warning released by the company last year caused investor sentiment to weaken in my opinion. It showed that the strategy of avoiding costs and improving efficiency was not working out as planned, and that as a result its financial performance would be below expectations.
While disappointing, the company also faces continued difficulties in its UK letters division. There is a gradual decline in demand for letter delivery according to my research, and this could mean that Royal Mail faces a continued headwind in this part of the business over the medium term. This could act as a continued drag on its financial performance, and may mean that investor sentiment remains weak for a period of time.
Investor sentiment may also be negatively impacted by the prospect of a general election. Labour is apparently keen on the idea of nationalising a variety of industries. Royal Mail could be included in this, and the potential for this to take place may cause investors to demand a margin of safety over the medium term.Turnaround prospects
The international and UK parcels divisions of the business have continued to perform relatively well in my view. Parcels are gaining in popularity as the rise of ecommerce continues. I think this trend could continue over the long run, with improved technology and a desire among consumers for greater convenience likely to lead to a greater usage of mobile devices to order a variety of goods and services.
Royal Mail’s international growth has been encouraging in recent quarters to my mind. The company has been able to build its international business so that it is a significant contributor to its overall financial performance. Continued investment in this area could strengthen the company’s long-term growth prospects to my mind, and may help to diversify it away from the UK at what remains a challenging period from a political standpoint.Investment prospects
In my opinion, the Royal Mail share price could experience continued challenges in the short run. Its downward trend may persist for a little while, since investor sentiment is very downbeat at the moment.
At the same time, though, I’m optimistic about its potential to generate improving financial performance in the long run. The growth potential of its international business and its UK parcels division could be strong, and may help to offset the decline in UK letters. Therefore, while risky in my eyes, it could offer turnaround potential over an extended time period.