MARKET REPORT: Shares in Royal Mail plunge

Shares in Royal Mail plunged after a broker outlined bleak prospects for the future.

In a blow to the FTSE 250 post group, JP Morgan downgraded the stock’s rating to “neutral” from “overweight” and lowered its price target of 360p from 360p to 270p.

“This reflects the growing losses in the UK with no end in sight and the potential for losses to mount further,” the broker said. The stock fell 8.1 percent, or 20.2p, to 229.7p.

The malaise was exacerbated after US parcel giant FedEx issued a profit warning. The stock plunged 22 percent in New York.

JP Morgan said shares in Royal Mail, which traded in London in 2013, are unlikely to improve as long as it battled the CWU union.

Workers of the postal group were scheduled to go on strike this month but canceled their action “out of respect” for Her Majesty Queen Elizabeth II.

JP Morgan lowered its forecast for Royal Mail parcel volumes for the full fiscal year in 2023, expecting a 16.6 percent decline from a 12.1 percent decline last year.

It ends a difficult year for the group, which tumbled out of the FTSE 100 in June. The stock has fallen by almost 56 percent in 2022.

On a low-company day, the FTSE 100 fell 0.6 percent or 45.39 points to 7236.68 and the FTSE 250 fell 0.5 percent or 89.18 points to 18797.14.

The mood was not helped by the pound falling to its 37-year low, as a slump in retail sales fueled fears of a recession.

AJ Bell analyst Danni Hewson said: “People are clearly thinking carefully about what they spend their money on.

“It’s just not quite as far as it used to be, and the essentials have to come first. But even the essentials cost more, and with the specter of unmanageable fuel bills looming, grown-ups did all they could do: economize.”

Intercontinental Hotels Group, the owner of Holiday Inn and Crowne Plaza chains, was also hit by a downgrade in the broker’s rating. Citigroup downgraded the stock’s rating from “neutral” from “sell” to “sell” and lowered its price target from 5000p to 4450p. It fell 4.7 percent, or 229p, to 4670p.

Outsourcer Capita did his best to cheer up after a double dose of good news. It is one of the government’s largest contractors and has agreed to transfer its Pay360 payment arm to enterprise software company The Access Group.

Capita expects this to bring in around £156 million, which will help strengthen its balance sheet.

The group also got a contract extension with Barnet Council, from September next year, when a 10-year deal expires.

It can go up to 57 million pounds. Capita shares were up 12.6 percent, or 3.22p, to 28.74p. Wickes stood, but was dealt another blow a day later after the construction company said customers had cut corners on large tickets, such as banks.

Citigroup lowered its 260p price target from 260p to 200p, while shares climbed 2.2 percent or 2.8p to 129.4p.

One of the non-executive directors of online grocer Ocado – Swedish billionaire Jorn Rausing – bought 422,004 shares for 644 pence each, worth almost £3 million, just days after it scared investors with a sell warning. It climbed 3.2 percent, or 21p, to 671p.

AstraZeneca got a boost after a regulator backed its coronavirus therapy to treat the disease and approved a second treatment used to prevent lower respiratory tract infections caused by respiratory syncytial virus (RSV).

The European Medicines Agency has approved Evusheld as a Covid treatment for adults and adolescents. The recommendations are usually followed by the European Commission, which has the final say on approvals. Astra fell 0.1 percent, or 8p, to 10122p.