How Much Further Can AO World PLC, Monitise Plc And Rolls-Royce Holding PLC Fall?

AO World PLC, Monitise Plc and Rolls-Royce Holding PLC are all down, but are they out?

| 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.

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.

Increasing prospects for a last-minute sell-out by the Greek government have given the FTSE 100 a boost, but London’s top index is still down 7.5% since April. But do bearish times like these provide us with bargains? A lot of that depends on why a share is falling.

Online fridges

Shares in online household appliance retailer AO World (LSE: AO) are down 45% over the past 12 months to 130p, but that hides a bigger story — since they peaked at 336p back in February, we’ve seen a 61% loss! A downbeat trading update on 24 February kicked off the slump, signalling the all-too-familiar ending of a bubble based on hype rather than cold hard cash.

It happens all the time, when a high-flying growth punt fails to exceed initial expectations — the early gamblers leap off the bandwagon and rush to find the next hot thing. But has the fall abated? The problem with a “jam tomorrow” stock like this is that it’s impossible to quantify. Forecasts suggest a tiny profit by March 2016 with something more substantial in 2017, but that’s all just guesswork right now and still puts the shares on a high valuation. And I just don’t see the barriers to entry that would place AO World above the general online marketplace.

New ways to pay?

Mobile payments firm Monitise (LSE: MONI) has suffered an even bigger fall, with its shares down 87% since their high of February 2014, to just 6.9p apiece today. The latest blow came from Visa Inc, which is dumping its shares in the company — Visa’s commercial deal with Monitise runs out in March 2016, and I wouldn’t be betting on the contract being renewed.

Monitise has been burning cash for years and has failed to meet early expectations, and the City’s analysts aren’t forecasting any profits before 2017 at the earliest — even though the company now says it should turn in a profit on an EBITDA basis in 2016. But this is another unquantifiable prospect right now, and if you invest in Monitise today you’ll be taking on a large helping of risk.

Aerospace

But how about a company with a long and proud track record, which has fallen on hard times of late? I’m talking of Rolls-Royce (LSE: RR)(NASDAQOTH:RYCEY.US), which has shocked the markets with a string of profit warnings, the latest just a few days ago. The result has been a 36% fall in the share price in two and a half years to 764p, with a 2015 recovery faltering as the shares have dropped 28% since a recent peak at the end of April.

But Rolls-Royce actually makes stuff, and there is still serious long-term demand from the commercial aviation business — with the long-haul and widebody jet markets tied up by Rolls and GE Aviation, there aren’t going to be any upstart competitors appearing any time soon. Rolls-Royce is the only one of these three that I’d consider buying.

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 shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »