International Distribution Services (IDS) saw its analyst rating cut by HSBC on Monday after an already challenging year for its shares.
HSBC analyst Achal Kumar downgraded IDS to a Hold rating from a Buy rating and kept a 215p price target on its shares.
Its shares are down 60% in 2022, so is a Hold rating sensible for investors?
Royal Mail has been in a dispute with its biggest labor union, the Communication Workers Union, which has led to several days of strikes over the past few months. Workers are demanding higher pay and operation changes, and they plan to hold further strikes in the run-up to the Christmas period.
As a result, Royal Mail has warned they could axe up to 10,000 jobs and experience deeper financial losses.
This follows the group’s recent first-half earnings, which saw an operating loss of £57 million compared to an operating profit of £404 million in the prior year period. IDS anticipates a full-year adjusted operating loss for Royal Mail to be between £350 million and £450 million.
However, IDS was recently initiated with an Outperform rating at Exane, with analyst Hugo Watkins seeing an upside in the shares given the company’s “healthy” growth and margin resilience.
Taking into account the Royal Mails situation, it is not ideal, but the company has been around for 500 years. Make of that what you will.