Royal Mail Group (LON: RMG) share price collapse gathered momentum this week as concerns about the company’s future continued. The stock crashed by more than 3.40% on Wednesday and reached its lowest level since September 2020. It has fallen by more than 70% from its all-time high.
Strikes and cost concerns
Royal Mail Group is a leading postal company with its primary operations in the UK, where it has a strong market share. Like other companies in the industry, Royal Mail had a strong performance during the pandemic as demand for online deliveries rose.
As a result, the company’s revenue and profitability rose, pushing it to reward shareholders with a dividend in 2021. It also expanded its business by acquiring Rosenau Transport, a logistics provider in Canada.
This year, however, Royal Mail has struggled as demand fot parcels and letters has waned. At the same time, the firm has seen its cost of doing business rise. It is now paying more money in terms of fuel and wages.
Royal Mail has also been in a conflict with its employees, who have downed their tools several times this year. On Wednesday, the RMG share price dropped after the union announced that it will go on strike 19 more times this year. This could lead to more disruptions, which will cost the company dearly.
Royal Mail’s management has warned that the business will make a loss this year. In a statement, a representative of the workers said:
“The chief executive of Royal Mail Group is treating postal workers as if they are stupid. These are the same people that have kept the country connected and returned Royal Mail Group to record profit.”
Therefore, with the company facing significant challenges and with the downward momentum continuing, there is a likelihood that the stock will continue falling in the near term.
Royal Mail share price forecast
The weekly chart shows that the RMG share price has been in a strong bearish trend in the past few months. In this period, it managed to move below the 78.6% Fibonacci Retracement level. It also fell below all moving averages while the Awesome Oscillator has moved below the neutral level.
Therefore, the path of the least resistance of the stock is downwards, with the next key support level to watch being at 150p. The stop-loss of this trade is at 210p.
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