Will the Rolls-Royce share price reach £4 or £5 first?

After its incredible rise, this Fool takes a closer look at what could be in store for the Rolls-Royce share price in the times ahead.

| 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.

Image source: Rolls-Royce plc

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.

I’ve been patiently waiting on the sidelines watching the Rolls-Royce (LSE: RR) share price continue to climb. I’m yet to invest. Nevertheless, the stock’s well and truly on my radar.

But at £4.60 a piece, are Rolls-Royce shares more likely to fall to £4 or rise to £5 first?

Past performance is by no means an indication of what a stock could do. But if it was, I’d be pretty confident in saying the stock will break the £5 barrier before we see any share price decline.

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

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Rolls-Royce made the list?

See the 6 stocks

After all, shares in the FTSE 100 icon have been gaining incredible momentum. In the last 12 months, they’re up 212.4%.

Yet the stock market’s more turbulent than that. What could be on the horizon next for Rolls is unknown.

Created with Highcharts 11.4.3Rolls-Royce Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The bear case

I’ve long talked about how my largest concern with Rolls stock is that it’s gone too far, too soon. And while I could be forced to swallow my words should it keep rising, it’s still a worry of mine.

It’s probably the main reason I’ve avoided adding the stock to my portfolio. Its rise has been nice to see, I always want to see British companies excel. However, I don’t want to buy shares now only for my investment to dwindle.

With Rolls, I think there’s the threat that happens. Investors have pushed the stock up in recent times. As easily as it’s soared, it could tumble.

Today, Rolls-Royce shares trade on 57.5 times forward earnings. The Footsie average is 11. In my opinion, that sort of reading could prompt a sharp recoil in its share price. To fall to £4, the stock would have to decline 13.1%.

The bull case

But on the flip side, an 8.7% rise would see its share price hit the £5 mark. There’s plenty of reasons to believe it’ll get there. And while I think Rolls looks expensive, I’ve been impressed with how it’s turned itself around after its pandemic struggles.

At one point, it seemed the business may have even been destined for bankruptcy. It was crippled with debt and multiple lockdowns took a serious toll on the firm.

Now, Rolls looks like a much stronger business. Profits are up and it’s generating free cash flow again. It has some lofty ambitions for the near term. So far, it seems on track to meet them.

Recently, the business announced that engine flying hours had recovered to 2019 levels. Interest rate cuts could lead to demand for travel to rise. This will only provide it with more momentum.

What’s more likely?

Whether Rolls breaks down to the £4 mark or surpasses the £5 barrier first is anyone’s guess. But what I do know is that I’ll be holding off from adding the shares to my portfolio for now.

Its turnaround has investors excited. But inevitably, the surge in growth we’ve seen will come to an end. I’m worried at that point we could see its share price fall.

I’m watching it like a hawk. Any sign of a dip in the market and I’ll be taking full advantage.

AI Revolution Awaits: Uncover Top Stock Picks for Massive Potential Gains!

Buckle up because we're about to dive headfirst into the electrifying world of AI.

Imagine this: you make a single savvy investment in some cutting-edge technology, then kick back and watch as it revolutionises entire industries and potentially even lines your pockets.

If the mere thought of riding this AI wave excites you and the prospect of massive potential returns gets your pulse racing, then you’ve got to check out this Motley Fool Share Advisor report – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And here’s the kicker – we’re giving you an exclusive peek at ONE of these top AI stock picks, absolutely free! How’s that for a bit of brilliance?

Get your free AI stock pick

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.

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce Plc. 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

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »