The Rolls-Royce share price is down 10% since a 52-week high. Is this a buying dip?

H1 results from Rolls-Royce are just around the corner, but what might they mean for the share price? I expect optimism, for now.

| 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: Getty Images

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.

Ever since the Rolls-Royce Holdings (LSE: RR.) share price took off last year, I’ve been waiting for it to fall back and give me a cheaper buying opportunity.

But trying to time things like that can be a mug’s game, and those who bought in have mostly done very well. Still, the shares have fallen 10% since their 52-week high in June.

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

What next?

This might just be a pause ahead of first-half results, due on 1 August. What happens when we see the figures could drive Rolls-Royce shares up further. If things are going in accordance with previous bullish guidance, that is.

Should you invest £1,000 in Babcock 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 Babcock made the list?

See the 6 stocks

But if there’s a miss? Well, there’s a chance that might send the shares further down into buying territory.

One thing’s for sure, there are plenty of people watching. Investing platform interactive investor says Rolls was its third most popular stock bought in June.

Those buyers will be expecting good things, for sure. But what might those things be?

Rolls-Royce outlook

At FY 2023 results time, CEO Tufan Erginbilgiç was super enthusiastic. He spoke of “unlocking our full potential as a high-performing, competitive, resilient, and growing Rolls-Royce.”

The board gave us guidance of £1.7bn-£2.0bn for 2024 operating profit, and put free cash flow at £1.7bn-£1.9bn.

With 2023 underlying operating profit at £1.6bn, we’re looking at a rise of between 6% and 25%, and that’s quite a range. I could see investors disappointed at just 6% growth, even if it’s still within guidance.

The free cash flow guidance suggests a rise of around 30-45% over 2023’s £1.3bn. That would be impressive, but it’s still a fairly wide range.

Uncertainty

At such an early stage, there’s always going to be uncertainty in guidance figures like these.

But you know what I think will be in the minds of a lot of Rolls-Royce shareholders? I reckon they’ll be expecting the top end of the range. They’ll want at least 25% more operating profit, and won’t be happy with just a 6% rise.

In May’s AGM trading update on 23 May, the CEO did speak of “further confidence in our guidance for 2024“. And that will surely cement the optimism.

But do you know what I prefer? I’d rather see a company boss who underpromises and overdelivers. That way, investors are less likely to become too optimistic. And less disappointed if results turn out good but not spectacular.

H1 results

What do I expect from the upcoming H1 update? Considering how recent the AGM update was, I suspect Rolls will remain bullish about its guidance. And we might not get the big buying dip I’m hoping for.

But I’m going to hold off, as I still think Rolls could slump if it only hits the bottom end of those FY expectations.

I’m too risk-averse to buy Rolls-Royce, at least until it doesn’t make the list of most-bought stocks on popular investing platforms.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Alan Oscroft 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

More on Investing Articles

Smart young brown businesswoman working from home on a laptop
Investing Articles

Down 15% in a week! Are these 5 FTSE 100 fallers screaming buys as markets plunge?

Five of Harvey Jones's favourite FTSE 100 stocks all have the same thing in common – they've fallen around 15%…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

2 stocks that have been crushed and now offer a ton of value

Edward Sheldon has been scanning the market for stocks that offer value after the sell-off. Here are two shares he…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

£10,000 invested in Aston Martin shares at Christmas is now worth…

Aston Martin shares have fallen from above £10 in early 2020 to pennies today. Is this the perfect time for…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

Up 5% in the last crazy week! Are these 2 income stocks the ultimate FTSE defensive plays?

Harvey Jones picks out two FTSE 100 dividend income stocks that have actually climbed while stock markets are heading in…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

2 beaten-down UK shares that now look really cheap

Looking for cheap shares to consider for the long term? These two British stocks offer a lot of value right…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

As stocks tank, is this a rare chance for ISA investors to get rich?

Shares have collapsed globally and valuations are becoming, on paper at least, a lot more attractive. Dr James Fox explores…

Read more »

Investing Articles

2 strong FTSE 100 dividend shares to consider as recessionary risks increase

Looking for secure passive income stocks to consider buying as thumping trade tariffs loom? Here are two FTSE 100 dividend…

Read more »

Investing Articles

Can Greggs shares offer shelter from Trump’s tariff chaos?

Greggs' shares have plummeted in recent months. But with very little exposure to the US or tariffs, could the stock…

Read more »