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 Lloyds Banking Group 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 Lloyds Banking Group 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.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Lloyds Banking Group 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 Lloyds Banking Group made the list?

See the 6 stocks

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.

Pound coins for sale — 51 pence?

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

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 »