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Author: Alan LittleDate: 2021-02-05

Royal Mail (RMG) +2% after UBS price target upgrade

Royal Mail (RMG) closed 2% higher on Thursday after UBS upgraded the postal service to a buy rating on expectations that its earnings will rise on the back of longer lockdowns in the UK. 

UBS added 125p to a new 445p price target for Royal Mail in a new note that indicated that pandemic-related risks outlined last year were subsiding. 

The bank was concerned that the demand for parcels could decline when COVID-19 measures were eased, but it referenced new data showing that 29% of UK consumers expect to spend more on online shopping this month. 

UBS also expects Royal Mail to benefit from Ofcom’s advice that mail deliveries should only take place between Monday and Friday, rather than the current Monday to Saturday schedule. 

This could drive costs savings of around £100m annually for Royal Mail’s UK parcels, international and letters (UKPIL) division.  

The rating hike sent shares higher after the London Stock Exchange opened on Thursday, and RMG eventually finished 1.62% up at 419.90p. 

In the US, Qualcomm (QCOM) slumped 9% on concerns about the chipmaker’s soft guidance for the current quarter. 

Qualcomm said that it now expects $31.9bn revenue and $6.91 earnings per share, down from the previous $32.2bn and $6.95 figures. 

Citi analyst Christopher Danely also believes that the 5G upgrade cycle has run its course. 

He noted: “We believe the upside is over and expect more instances of downside such as the lower margins.” 

Qualcomm posted a mixed report for fiscal Q1 with earnings ($2.12 per share) coming in two cents ahead of expectations and revenue ($8.24bn) falling $30m short.  

At midday on the Nasdaq, QCOM was down 8.88% at $147.85. 

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