The Motley Fool

Is the Rolls-Royce share price finally on the road to recovery?

A Rolls-Royce employee works on an engine
Image: Rolls-Royce

After treading water for much of the past year, the Rolls-Royce (LSE: RR) share price has taken off over the past two weeks. Since the middle of September, the stock’s up by more than a third, taking its gains over the past 12 months to nearly 200%.

However, this figure’s a bit misleading because it encompasses the end of September and the beginning of October last year. That’s when the stock dropped to its lowest level since the early 2000s. 

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Since the beginning of January this year, the Rolls-Royce share price has returned just 40%. Investors have been buying the stock over the past few days as the company’s made some significant strides in its recovery. 

Confidence returns

After waiting the best part of a year for some good news, three developments occurred in the last week, substantially improving the group’s fortunes. 

First of all, Rolls-Royce finally sold its Spanish business ITP Aero for £1.5bn. Secondly, the firm inked a £1.9bn contract to supply parts for the US Air Force’s fleet of B-52 bombers. And third, it looks as if the government’s open to funding its project to build mini nuclear reactors. 

These positive developments came on top of an earlier announcement that the US would be reopening its borders to British and European travellers. 

The majority of Rolls’ sales come from maintenance contracts on the engines it’s already sold to aerospace clients. The more time these engines spend in the sky, the more maintenance they need. Therefore, the reopening of the transatlantic market is a significant positive development for the group.

Rolls-Royce share price outlook

Whenever I’ve covered the stock, I’ve always concluded its future’s too uncertain to recommend it as an investment. 

However, following all of the above developments, I think Rolls’ outlook has improved dramatically. Its balance sheet will benefit from the £1.5bn cash infusion from the Spanish business sale. Its revenues should increase greatly with new long-term contracts and the reopening of the transatlantic travel route. 

That’s not to say the group’s out of the woods entirely. It still faces some significant challenges. These include high and rising costs and weak demand for engines from the aviation industry. It could be years before the industry returns to 2019 levels of activity

Still, on the whole, I think the company is finally heading in the right direction after nearly two years of uncertainty. And with this being the case, I believe the Rolls-Royce share price is on the road to recovery. As the global aviation industry recovers, there could be further positive updates from the group over the next few quarters, and this may drive the share price higher. 

As such, I’ve changed my opinion of the stock. I’d happily buy this investment as a speculative holding for my portfolio. 

Our 5 Top Shares for the New “Green Industrial Revolution"

It was released in November 2020, and make no mistake:

It’s happening.

The UK Government’s 10-point plan for a new “Green Industrial Revolution.”

PriceWaterhouse Coopers believes this trend will cost £400billion…

…That’s just here in Britain over the next 10 years.

Worldwide, the Green Industrial Revolution could be worth TRILLIONS.

It’s why I’m urging all investors to read this special presentation carefully, and learn how you can uncover the 5 companies that we believe are poised to profit from this gargantuan trend ahead!

Access this special "Green Industrial Revolution" presentation now

Rupert Hargreaves 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.

Our 6 'Best Buys Now' Shares

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.

Simply click below to discover how you can take advantage of this.