The past three weeks brought welcome relief for struggling shareholders of Rolls-Royce Holdings (LSE: RR). Over the past 12 months, Rolls-Royce shares faced almost relentless pressure, with every rally followed by further falls. But a recent rebound saw these battered shares soar.
Rolls-Royce shares slump
Thanks to the global chaos caused by Covid-19, the shares took a severe battering for much of 2020-21. Unfortunately, this slide continued into 2022, leaving shareholders nursing deeper losses. Here’s how this popular FTSE 100 stock has performed over seven timescales:
| One day | 1.6% |
| Five days | 10.6% |
| One month | 18.6% |
| Six months | -1.7% |
| 2022 YTD | -32.6% |
| One year | -37.7% |
| Five years | -75.3% |
Despite a sustained rally over one month, the shares have crashed by almost two-fifths over the past 12 months. Even worse, they’ve collapsed by more than three-quarters over the past half-decade. The brutal damage that coronavirus did to the airline industry is entirely to blame for this multi-year plunge.
Then again, in the darkest depths of the Covid-19 crisis, Rolls-Royce came close to the brink. To survive, the famed British engineering firm raised billions of pounds in rescue funds by issuing new shares and bonds, and through fresh bank borrowings. The fact it pulled through is something I think shareholders should be grateful for, even today.
The share price bounces back
On a more positive note, the Rolls-Royce share price has soared since hitting its 2022 low of 64.44p on 28 September. As I write (late on Wednesday afternoon) it stands at 82.76p, having surged by 28.3% from this rock-bottom price.
That said, at their 52-week high, Rolls-Royce shares hit 150.48p on 9 November last year. Their subsequent steep slide makes them one of the worst performers in the FTSE 100 over 12 months. Yikes.
Rough ride ahead?
Unfortunately, the lack of underlying fundamentals (profits, earnings and dividends) make it impossible to accurately value Rolls-Royce shares right now. Then again, I’m very confident that this stock isn’t worthless and won’t go to zero pence. But I’m equally unsure how much this £6.9bn business is truly worth right now.
To be honest, I’d have happily bought Rolls-Royce shares below 65p as a short-term recovery play. But I missed my chance and am kicking myself for taking my eye off the ball. Looking ahead, I see the stock as a geared play on three things: higher defence spending, growth in civil aviation/air miles, and green energy (the group’s proposed nuclear-powered small modular reactors and hydrogen-fuelled engines).
In the meantime, I fully expect Rolls-Royce shares to ride a rocky road in 2022-23, keeping them among the FTSE 100’s most volatile stocks. That said, if things go the company’s way on all fronts, its share price could continue to climb over the next, say, 12-24 months.
For the record, I’ve decided against buying Rolls-Royce shares right now. I’d prefer to see the group’s fundamentals improving before climbing aboard. And the firm’s £5.1bn of net debt also puts me off in the face of rising global interest rates. Also, rising mortgage rates and energy bills might lead to millions of foreign flights being abandoned next year. But I might buy the shares after the group’s next set of results, if they look strong enough!
