RM share price surges on hopes it could win 550 million contract to deliver Covid tests

[RobertT]

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Royal Mail’s share price surged nearly 8% today amid heavy trading volumes after reports said it was in a battle with Amazon to win a contract to deliver hundreds of thousands of coronavirus home testing kits.

The company’s shares have been increasingly in investors’ sights as analysts bet record numbers of families would be doing their Christmas shopping online this year amid Covid lockdowns.

Analysts at Citigroup today became the latest to increase their targets on the group’s share price.

Citi upped its target from 210p to 400p, following similar upgrades from other big broking houses last week.

The Sunday Telegraph reported that it was in a scramble with Amazon to win Boris Johnson’s “Operation Moonshot” programme contract to deliver 215,000 home testing kits a day.

The total percentage of Royal Mail’s stock being shorted down from 10% in August to 1% today and the share price, up 21p to 274.25p, has rallied since lows of 124p in March.

That was boosted when Czech energy tycoon Daniel Kretinsky increased his stake in the firm dramatically.

His intentions are unclear although some have said he may be seeking to carve up the business and buy its overseas arm, GLS. Others have said he simply sees Royal Mail as an undervalued business.

Share trading today saw volumes of triple its usual level amid frenzied demand for stock.

They have fallen sharply since 2018 as demand for letters has gone into freefall.

Royal Mail is one of the widest held shares by private investors.

They bought in at the flotation in 2013 at 330p.

The Department of Health has given operators until tomorrow to finalise their bids for the programme that could see up to four tests delivered to each household per day.

The contract value is for £550 million but that could swell to £1 billion. It could also be extended beyond the initial 12 months.

Investors have been warming to the stock since the Spring, with several big investors exiting their short positions.

[wacko74]

I fully expect Amazon to win the Mooshot contract... and then just hand over the kits for final mile delivery to us which we'll probably end up doing for a loss due to DSA/USO.

Also it's being reported that the total cost for Moonshot is a staggering £40bn... and yet the contract for processing, delivering and collecting the test kits is only £550m? Even though that is probably the most labour intensive aspect of the whole programme.

I'd love to know what the other £39.45bn is being spent on