Royal Mail shares rebound as Investec shrugs off Ofcom review
Royal Mail shares bounced into positive territory on Tuesday afternoon, erasing earlier losses, despite concerns about an Ofcom review into the regulation of the postal operator.
FTSE 100
7,847.99
17:04 17/04/24
FTSE 350
4,316.81
16:54 17/04/24
FTSE All-Share
4,273.02
16:54 17/04/24
Industrial Transportation
4,093.66
16:55 17/04/24
International Distributions Services
276.00p
16:40 17/04/24
After dropping as much as 3% in morning trade, the stock was up 0.2% at 506.14p before the close, helped by upbeat comments from broker Investec.
Ofcom said the withdrawal of rival Whistl from the direct delivery industry marked “significant change” in the market and will focus its review on whether Royal Mail’s prices are "both affordable and sufficient to cover the costs of the universal service."
Despite investor concerns, Investec reiterated a ‘buy’ recommendation on Royal Mail, saying that “the story remains the same”.
“As Whistl’s withdrawal has returned the competitive environment to that which prevailed when the current regulatory framework was set in 2012, and as parcel competition has intensified considerably since that point, we do not expect any substantive changes when the review concludes in 2016,” the broker said.
It said that while the review my provide an “overhang” on the shares, investors should view weakness as a buying opportunity and Whistl’s exit was still a “very positive outcome for RMG”.