The Motley Fool

Here’s where I think the Rolls-Royce share price could go in 2021

Image source: Getty Images.

Of all the companies suffering in the Covid-19 pandemic, the plight of Rolls-Royce (LSE: RR) pains me more than most. For years I’ve considered it an excellent company and a great long-term investment. But the Rolls-Royce share price has crashed 80% in 2020.

And that’s even after an impressive 50% rebound in November, on the back of vaccine test success. Will the recovery continue?

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

I’ve always rated Rolls as a top ‘picks and shovels’ company. That’s named after the old gold-rush days, when some prospectors struck it rich while others found nothing but dirt. But whoever hit the gold, those selling the picks and shovels pocketed healthy profits.

Defensive Rolls-Royce share price?

The airline industry is a bit like that. It’s extremely competitive, and airlines have little in the way of differentiation. Warren Buffett famously looks for companies with defensive moats, and even he now reckons buying airlines is a mistake. But whichever carrier is making the best profits, the companies providing the engines should prosper. And that, I’ve always thought, gives the Rolls-Royce share price a defensive edge.

The only problem is, the pandemic has laid them all low. It’s like the gold has all been worked out, and the miners have all left town.

But with the arrival of multiple successful vaccines, the sun-seekers will soon be flocking back to the travel agents and the airports, right? And that will push the Rolls-Royce share price up again, won’t it?

Vaccination timing

Well, the vaccine will not reach everyone overnight. Many of us will have to wait months before we get our jabs. And for the aviation industry, I see another aspect. Let’s look at the priority order for vaccinations.

NHS and other frontline workers will be at the head of the queue. Folks in care homes, the old and the vulnerable, will be next. Others with underlying conditions come after that, and then healthy older people. And finally, the young and fit are at the back of the queue.

So with the exception of frontline workers, people will get their vaccinations roughly in the reverse order of their likelihood of going flying. And frontline workers may well be under pressure to hold off on their holidays too. I suspect aviation won’t recover as quickly as investors hope. And the Rolls-Royce share price will face continued pressure.

Long-haul, short-haul

Even when the planes do start to return to the skies, I see one more thing that could hold Rolls-Royce back. My Motley Fool colleague Karl Loomes has explained it well, and it’s all to do with how far people want to fly. Rolls-Royce is mostly in the long-haul market, selling and supporting engines for wide-bodied jets. But experts reckon demand for short-haul flights will recover fastest, with long-haul demand currently close to zero.

Putting this all together, I think the aviation recovery will be slower than the optimists hope. And Rolls-Royce’s part of it might well not arrive until nearer the tail-end.

For the Rolls-Royce share price, I think that could well mean a traumatic 2021 with little progress. And I can’t see a clearer picture of longer-term prospects emerging until at least the summer. I’m not buying now.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

Alan Oscroft has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.