With the Royal Mail share price below 300p, is it a buy?

The Royal Mail (LON: RMG) share price crashed to the lowest level since December 2020 as investors reflect on the company’s earnings. The stock declined to a low of 299p, which is about 46% below the highest level in June 2021.

RMG growth slowing

Royal Mail, the giant letter, mail, and logistics company is going through major headwinds as demand slows and costs rise. 

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This trend has happened across other businesses in the industry like Deutsche Post, FedEx, and UPS. For one, the cost of delivering products has skyrocketed as oil prices and wages rise

In a statement, the company said that its revenue grew by 0.7% to 12.712 billion pounds in the 52 weeks to March 2022. It made 12.63 billion in the previous year.

As a result, the company’s operating profit declined from 611 million pounds to 577 million pounds while profit before tax fell to 662 million pounds. 

By segment, Royal Mail’s revenue declined by 1.6% while GLS rose by 4.4% on a year-on-year basis. The GLS business revenue rose because of the strong volume ad freight income. In a statement, the firm’s CEO said:

“It has been a year of progress, but there is much more to do. Over 50% of parcels are now processed automatically, the delivery of two new parcel hubs are on track, and we are reinventing our services and digital experiences to make sending and receiving even easier in an online age.”

Royal Mail faces multiple headwinds going forward. For example, the price of fuel has risen dramatically in the past few days as the conflict in Ukraine continues. Additionally, the company has been forced to pay higher salaries in a bid to attract new workers. 

Worse, with inflation rising and online sales plummeting, there is a possibility that the company will find it difficult to recover.

Royal Mail share price forecast

Turning to the daily chart, we see that the RMG share price has been in a strong bearish trend in the past few months. Most recently, the stock formed a descending channel pattern that is shown in blue. It also formed a death cross, which happens when the 50-day and 200-day moving averages make a crossover.

At the same time, the Relative Strength Index (RSI) has moved to the oversold level. Therefore, there is a likelihood that the Royal Mail share price will continue falling now that it has moved below the support line.

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