Rolls-Royce share price is around 100p. Here’s what I’d do

As the Rolls-Royce share price trades for around 100p, Jay Yao writes what he’d do given the upcoming events and the battle between vaccines and variants.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

The Rolls-Royce (LSE:RR) share price has likely reflected the recent battle between Covid-19 vaccines and variants. Initially, the Pfizer vaccine candidate news really beat efficacy estimates in November and the Rolls-Royce share price rallied. Later, Covid-19 variants spread and made the prospect of a fast recovery in civil aviation more distant. The Rolls-Royce share price fell as a result. With the Rolls-Royce share price now close to the 100p level and everything that’s happened, here’s what I’d do.

Vaccines versus variants

In the battle between the vaccine and the variants, it’s not the end of the world for Rolls-Royce. While the spread of Covid-19 variants has slowed the recovery in civil aviation, the company still expects to turn cash flow positive at some point in the second half of 2021, according to a trading update released earlier in the year. Management is also confident that they are well positioned for the future given the company’s liquidity of around £9bn.

At its current stage, I reckon the Covid-19 vaccines are getting a slight upper hand on the variants. Production of Covid-19 vaccines has ramped up higher and the number of new cases has fallen in many parts of the world. If the number of new cases continue to decline sharply, there is the possibility that civil aviation recovery expectations could increase and this could potentially benefit the Rolls-Royce share price.

There could also be hope in the future against variants. Companies like GlaxoSmithKline and CureVac are, for instance, working on multivalent mRNA Covid-19 vaccine candidates that could target variants more effectively. The two companies, which are working together, hope to bring a multivalent product onto the market next year. If the late stage results of those multivalent vaccine candidates are positive, I reckon that civil aviation recovery expectations could increase.

With this said, Covid-19 is constantly mutating and there is potential for a new strain to hinder civil aviation more than expected. As a result, the Rolls-Royce share price could always decline.

Rolls-Royce share price: what I’d do

Given the current information on Covid-19 variants and the current Rolls-Royce share price, I’d buy shares. Making quality and dependable jet engines is one of the hardest things in the world to do. It takes a lot of engineering know-how that I think gives Rolls-Royce a potential competitive advantage in future growth sectors. I think civil aviation will eventually recover and RR could be a good investment as a result. I could be wrong, however, if a new Covid-19 variant spreads and becomes a big problem.

I’d also follow the annual result report next month, particularly when it comes to future guidance (if management provides any). If Rolls-Royce beats the market’s real estimates on earnings or guidance, I could see how the stock could go higher. I could also see the stock going lower if the results are underwhelming. I’d also be interested in how the company’s planned sale process of ITP Aero is going. I reckon a higher than expected sale price could help the stock.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jay Yao has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. 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.

More on Investing Articles

Female student sitting at the steps and using laptop
Investing Articles

Greggs shares: an outstanding bargain after crashing nearly 40%?

Shares of one-time market darling Greggs have been in foul form recently. But is this a once-in-a-blue-moon opportunity for our…

Read more »

Close-up of children holding a planet at the beach
Investing Articles

This FTSE 100 stock’s suddenly become the highest-yielder on the index!

The league table of FTSE 100 (INDEXFTSE:UKX) dividend stocks has a new number one. But our writer explains why there…

Read more »

Rear View Of Woman Holding Man Hand during travel in cappadocia
Investing Articles

Is this under-the-radar UK stock as cheap as its rooms?

Our writer’s been keeping an eye on a little-known UK stock that operates in a niche, but profitable, sector of…

Read more »

Young Caucasian woman holding up four fingers
Investing Articles

It’s a ‘Fabulous Friday’ for holders of these FTSE 100 shares!

Four members of the FTSE 100 (INDEXFTSE:UKX) are making their latest dividend payments today (11 July). Our writer takes a…

Read more »

Man riding the bus alone
Investing Articles

Check out this spectacular FTSE 250 stock

UK investors willing to look beyond the FTSE 100 can find some outstanding companies. Online advertising business Baltic Classifieds might…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

The JD Sports share price is down 18% in a year. And the stock’s only yielding 1.1%. Here’s what I’m doing…

With the JD Sports share price struggling and a tiny dividend on offer, there doesn’t appear to me much going…

Read more »

Passive and Active: text from letters of the wooden alphabet on a green chalk board
Investing Articles

How long would it take an owner of Legal & General shares to get their money back in passive income?

Our writer looks at the passive income potential of Legal & General, one of the highest-yielding shares on the FTSE…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Small but mighty: 2 FTSE 250 growth shares beating expectations

Mark Hartley picks out two lesser-known FTSE 250 shares delivering outstanding earnings growth – but with share prices that are…

Read more »