Rolls-Royce Share Price is Bleeding. It Could Get Worse

Summary:

The Rolls-Royce share price bleeding is accelerating as investors react to the rising Delta cases. We explain what to expect

The Rolls-Royce share price has underperformed recently. RR stock opened on Monday by crashing by more than 2.30% as the shares fell to the lowest level since February this year. It has also crashed by more than 30% from its highest level this year. This mean that it is in bear territory. Other aviation-related shares like IAG, EasyJet, Ryanair, and Wizz Air also crashed by more than 3%.

Rolls-Royce Holdings news. Rolls-Royce share price is crashing today as investors react to the rising number of Covid cases and restrictions measures in some key countries. It is also falling amid the troubled UK reopening. The government has moved on with lifting restrictions in England, meaning that all businesses will be allowed to operate as normal.

However, as the government moves on with these measures, the country’s prime minister is in 10-day isolation after having close contact with Sajid Javid. Javid, the new health minister is infected with the disease. At the same time, a senior scientist in the UK has said that the number of daily Covid cases could hit 200k.

Other countries are seeing a surge in Covid cases. For example, a French minister said that the country could reintroduce curfew in Paris. Thailand reported a record number of daily cases while Australia has intensified lockdown measures. Meanwhile, the US is seeing the fourth wave of the virus as all states saw rising cases.

Therefore, these numbers are worrying for the Rolls-Royce share price because the company makes most of its money selling and servicing aircraft engines. The rest of the revenues come from power and military contracts.

So, what next for the RR share price?

Rolls-Royce share price forecast

In my note on the Rolls Royce share price, I noted that a DCF valuation showed that the RR stock was cheap by about 73.6%. I later on concluded that technicals pointed to further weakness of the stock.

This outlook has not changed yet. In fact, looking at the daily chart, we see that the RR share price has moved below the 200-day and 50-day moving averages. In technical analysis, this is known as a death cross and is usually a sign that the asset will keep falling. At the same time, it is approaching the important support level at 86.97p, which was the lowest level on January 26.

Therefore, I suspect that the stock will keep falling as investors chase for better yields elsewhere. Any drop below 85p, will bring the next support at 80p in view. This prediction is in line with what I predicted a few weeks ago when I hinted that the shares would crash to 85p.