Shares of Royal Mail PLC (LON: RMG) soared over 15% today after the stock was upgraded to “Overweight” from “Neutral” by JP Morgan analysts.
The price target is increased to 374p from prior 253p on expected improvement in trading over the next 18 months. On this basis, the bank also raised estimates for Royal Mail, with FY21 and FY22 operating profit projections raised by 300% and 11%, respectively. Revenue growth for FY21 is also hiked to 28% from prior 22%.
“The primary change in forecasts is on parcel volume, with Royal Mail’s previous guidance expecting a material slowing in H2, which we think is unlikely, given the prolonged impact of Covid-19 on shopping habits,” the bank said in a note to clients on Wednesday.
“Parcel price/mix may also be helped by the current environment, due to shortages in sorting capacity. We also expect the recent launch of parcel returns service, and potential volume from Covid-19 testing may benefit parcels, though we do not forecast this.”
Royal Mail share price rose over 15% initially to print 260p – the highest the stock traded since April last year. Shares now trade at 251p or about 7.3% higher on the day.
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