The Motley Fool

The Rolls-Royce share price: have we seen the bottom?

Image source: Getty Images.

Unlike many UK stocks, the Rolls-Royce (LSE: RR) share price didn’t hit its lowest value during the market crash roughly 11 months ago. In fact, it wasn’t until October 2020 that the valuation hit rock bottom.

Since the shares now appear to have settled around the 100p mark, is it now possible to say the company is through the worst and the only way is (slowly) up? And having avoided the shares like the plague since the pandemic first arrived, should I now throw caution to the wind?

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...

Here’s my take.

Reasons to be optimistic

Naturally, the direction of the Rolls-Royce share price will likely be influenced to a great degree by what happens next in the pandemic. So, let’s look at the reasons for being optimistic on this front.

The recent drop in infection levels and successful vaccine rollout raises the hope of international travel resuming. Indeed, Boris Johnson stated yesterday that 17 May has been selected as the earliest possible date for this to happen. That’s still a long way away off. But the mere mention of a date should be sufficient to get holidaymakers (and investors) excited. This will likely boost the share prices of listed airlines like IAG, Ryanair and easyJet. One would assume Rolls-Royce will experience a similar uplift by association.  

Another reason for thinking the shares may continue ascending in the months ahead is that plenty of my fellow UK investors seem bullish. Rolls-Royce was the fourth most popular buy on investment platform Hargreaves Landsdown last week. In fact, the only companies more in demand were those offering exposure to Bitcoin and the budding medical cannabis sector!

On the other hand…

Of course, the road ahead may still prove rocky for Rolls. While Boris Johnson has stated that the lifting of restrictions would be “irreversible” this time around, he’s also made it clear the coronavirus data must satisfy four tests at all stages of his roadmap out of lockdown. There’s no guarantee this will be the case.

As much as I hate to say it, I think the emergence of a new, deadlier variant of coronavirus isn’t beyond the realms of possibility. It would also be incredibly problematic for the FTSE 100 firm. In such a situation, any thought of air travel recovering would quickly evaporate. As a result, the Rolls-Royce share price would likely head south again. 

Perhaps this is why Rolls was also seventh in the list of most popular sells at Hargreaves Lansdown last week. 

Opportunity cost

For me, however, the biggest reason for continuing to avoid Rolls-Royce hasn’t changed. Namely, the opportunities available elsewhere.

At a time like this, I’m asking myself what sort of business will provide me the best return over the long term. Is it one that will still face a huge debt pile and operational difficulties once the coronavirus storm has passed? Or is it one with sound finances, operating in a less cyclical space, that also stands a good chance of growing profits in the years ahead without huge amounts of investment? Perhaps it may even pay a dividend. I’m confident it’s the latter.

Have we seen the bottom in the Rolls-Royce share price? I’m cautiously optimistic. But not to the extent that I feel motivated to invest myself.

One stock for a post-Covid world...

Covid-19 is ripping the investment world in two…

Some companies have seen exploding cash-flows, soaring valuations and record results…

…Others are scrimping and suffering.

Entire industries look to be going extinct.

Such world-changing events may only happen once in a lifetime.

And it seems there’s no middle ground.

Financially, you’ll want to learn how to get positioned on the winning side.

That’s why our expert analysts have put together this special report.

If the pandemic has completely changed our lives forever, then they believe that this stock, hidden inside the tech-heavy NASDAQ, could be set for monstrous gains...

Click here to claim your copy now — and we’ll tell you the name of this US stock… free of charge!

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

Where to invest £1,000 right now

Renowned stock-picker Mark Rogers and his select team of expert analysts at The Motley Fool UK have just revealed 6 "Best Buy" shares that they believe UK investors should consider buying NOW.

So if you’re looking for more top stock ideas to try and best position your portfolio in this market, then I have some good news for your today -- 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.