Should I buy more Rolls-Royce shares at 89p?

Owning Rolls-Royce shares over the past few months has been a wild ride, but should I buy more as international conditions improve?

| More on:
Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home

Image source: Getty Images

Rolls-Royce  (LSE:RR) is a FTSE 100 jet engine producer and manufacturer of power systems. Airlines are once again taking flight, powered by the company’s engines. There is also the possibility of increased government defence spending ahead. So, should I buy more Rolls-Royce shares at the current price of 89p? Let’s take a closer look.

Patience was the key

The Rolls-Royce share price has been steadily climbing in the past few weeks, from a low of 78p to a high of 95p. Much of this has merely been down to perceived improvements in stock market conditions.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Having purchased shares at 98p some months ago, it hasn’t been easy to watch the share price gradually slip. Given my analysis of the underlying business, however, I simply have to remain patient.

The pandemic also appears to have reached an end. This could be good news for the firm, because it is paid by the flying hour by airlines using its engines. 

For the four months to 30 April, flying hours were up 42%, year on year. Given that international travel is recovering at pace, it seems highly likely that income from these engine service agreements will only increase.

Rolls-Royce has also been closely involved with innovative aviation projects, like Project Sunrise. Run by Australian airline Qantas, this seeks to make regular flights between the east coast of Australia, and London and Paris.

The airline has purchased 12 Airbus A350 aircraft for the project, powered by Rolls-Royce’s Trent XWB-97 engines. This could further bolster the company’s civil aerospace revenue. Any pandemic resurgence, however, could bring this operation to a halt.

Defence and nuclear

Rolls-Royce recently secured a number of lucrative defence contracts, including with the US Air Force. Due to the pandemic, there is currently a backlog in orders.

However, the war in Ukraine may push governments to increase defence spending in the coming months and years. This could be positive news for Rolls-Royce. 

The business has also been developing small modular reactors (SMRs), which could provide energy from nuclear power. This has attracted investment from the UK and Qatari governments.

Other countries, like China, are also investing heavily in nuclear power in a bid to move away from oil, gas, and coal. Rolls-Royce could stand to benefit from this move.       

Before the pandemic, the share price was around 300p. Factors putting pressure on shares now include the war in Ukraine, as the firm faces shortages of raw materials, like titanium. Inflation and rising interest rates have also increased negative investor sentiment towards the company.

With a return to pre-pandemic conditions, I think my shares could increase greatly in value from where they are currently, although I am not making a precise price target.

Overall, conditions are improving for this industry giant. It’s not been easy holding my shares, but I was never tempted to sell when they fell. I think the future could be bright and I’ll be buying more shares soon to lower my average weighted price.   

Should you invest £1,000 in Rolls-Royce right now?

Before you consider Rolls-Royce, you’ll want to hear this.

Motley Fool UK's Director of Investing Mark Rogers has just revealed what he believes could be the 6 best shares for investors to buy right now… and Rolls-Royce wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 shares that are currently better buys.

All you need is an email address to get started

Andrew Woods owns shares in Rolls-Royce. 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.

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 considered, so you should consider taking independent financial advice.

More on Investing Articles

Investing Articles

With inflation at 9%, here are the stocks I’d buy now

Inflation is creating all kinds of problems in the global economy right now. But not all companies will be impacted…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

3 easy actions that could boost my stock market returns

The UK stock market is going through a sticky patch so this Fool is looking for ways to improve his…

Read more »

Hispanic man using laptop in home office and drinking coffee
Investing Articles

Boohoo shares: time for me to admit defeat?

This Fool is nursing heavy losses from his Boohoo Group (LON: BOO) shares. Should he sell up and move on?

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

6% dividend yields! 2 cheap UK shares to buy in July

Harshil Patel considers two cheap UK shares paying fairly high dividends. He'd consider them for his Stocks and Shares ISA.

Read more »

Social media and digital online concept, woman using smartphone
Investing Articles

Will Lloyds shares recover in 2022?

Lloyds shares have struggled this year and the looming recession won't help. But I'd still buy them today.

Read more »

Two hands holding champagne glasses toasting each other with Paris in the background
Investing Articles

Can the stock market make me rich even now?

Here are three ways I'm coping with the stock market's recent bout of weakness and aiming to build wealth in…

Read more »

Cogs turning against each other
Investing Articles

3 top investment trusts to buy right now

Investment trusts offer a wide range of options for investors. And in troubled times, they provide some safety through diversification…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Why hasn’t the FTSE 100 crashed in 2022?

The catastrophic events of 2022 have left investors around the globe fearing the worst for stock markets. And some have…

Read more »