International Distribution Services PLC (IDS), the owner of Royal Mail (LON:IDSI), had its target price slashed to 115p from 185p by analysts at Liberum, who reiterated their ‘sell’ recommendation on the stock.
Forecasts were updated following a recent warning on UK trading and industrial action, said Liberum.
Trading is seen as an even bigger concern than strikes, which have followed the postal and parcel delivery service all year.
Additionally, Liberum believes that IDS’s lack of pricing power does not bode well for long-term margins.
“Even giving the group the benefit of the doubt on savings from redundancies points to margins stabilising, not recovering, and only temporarily.
“Reported redundancy rounds do not appear sustainable. We have yet to hear management articulate a strategy to return the UK business to profitability,” the broker said.
IDS shares fell 4.7% to 191.65p in late morning trade.