With Royal Mail shares this low, is now the time to buy?

first_img Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Simply click below to discover how you can take advantage of this. Image source: Getty Images. Rachael FitzGerald-Finch | Saturday, 2nd May, 2020 | More on: RMG Royal Mail (LSE: RMG) shares are at all-time lows. The postal and courier firm, a favourite among some value investors, is looking cheap. But I’m not convinced it’s a good buy for your ISA.The coronavirus-induced market crash floored the FTSE 250 firm’s share price, at 124p, at the beginning of April. It has since made some gains, but it remains 74% lower than its 2018 peak of 598p. Moreover, 65% of the Royal Mail share price crash occurred in 2018–19, before the pandemic.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Although share price is no substitute for value, a sustained price drop of this size could indicate a struggling company. Despite this, Citigroup has just upgraded Royal Mail’s stock. What prompted this change of view?Rare double upgrade on Royal Mail sharesCitigroup decided Royal Mail shares are worth a rare double upgrade. This means that their analysts changed the ‘sell’ recommendation to a ‘buy’, bypassing ‘hold’.Apparently, this bullish decision is because of the soaring number of parcels sent during the coronavirus lockdown period. Royal Mail accounts for about half of all the parcel delivery in the UK. Citigroup analysts believe Royal Mail profits may surge up to 400% higher than currently forecast. This is a huge change, reflecting the firm making the most of short-term opportunities.Moreover, with Royal Mail shares being battered this year, some analysts believe the group is currently undervalued. Citigroup is giving the stock a fair value of around 210p.  The downsidesRoyal Mail stock is beginning to climb. However, I think some of this rise is because of Citi’s upgrade. Indeed, this is one of the problems of buying a stock that’s just been upgraded. The new price already includes the market feeling about the business. It’s likely that Royal Mail stock is already close to being fairly valued.Moreover, it is not likely that the increased business due to the coronavirus lockdown will be sustained. Prior to this period, pending postal worker strike action and falling volumes in letter delivery was affecting profits. Royal Mail has recently announced it will be stopping Saturday letter deliveries too. Apparently, staff do not feel adequately protected and have placed pressure on managers to do more to resolve this. Perhaps the decision is justifiable on health grounds or indeed for cost-cutting measures. However, halting the Saturday delivery service may reduce letter volume delivery even further; letters are core business. In addition, Royal Mail’s dividend yield was looking to be increasingly unsustainable. It sat at just over 15% before the company wisely scrapped it. Although the firm can now claim to have cancelled it in line with other large businesses, it was unaffordable prior to the stock market crash.Royal Mail stock is currently trading around 173p. This is below Citi’s 210p estimate, which could indicate the firm has more value to provide its investors. However, prospects for Royal Mail’s business were not great before the crash. Royal Mail is struggling with newer and more innovative competitors and persistent threats of staff industrial action. Until it shows it can compete, I will not be buying, despite the low price. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Rachael FitzGerald-Finch has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.center_img Our 6 ‘Best Buys Now’ Shares With Royal Mail shares this low, is now the time to buy? “This Stock Could Be Like Buying Amazon in 1997” See all posts by Rachael FitzGerald-Finch I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Enter Your Email Addresslast_img read more