However, where will it go next? And does this fall mean I should be loading up on RR shares? Let’s find out.

The Rolls-Royce share price in 2022

Before we look at whether I’d buy Rolls-Royce shares today, let’s begin by looking at its performance year-to-date.

The stock entered the year trading for near 130p, a mere slither of the 300p price we saw pre-pandemic. And since then, Rolls-Royce has continued to fall.

However, late March saw the share price jump amid takeover rumours. As stories circulated via the Betaville website that the firm could soon be involved in a “significant corporate transaction,” investors rushed to purchase shares. The stock spiked 20% on the back of the news.

Wider outlook

Since then, the share price has fallen below the 100p barrier once again.

One reason for this is due to the hit Rolls-Royce took yesterday as JP Morgan downgraded the stock to ‘underweight’, as well as cutting its target price from 140p to 75p. Informing investors, it stated that the ‘New Markets’ division may offer “good long-term sales potential,” but that there is “no guarantee of good profits.” It further mentioned how it “might even be loss-making into the 2030s.” This is clearly not good news. And the 5% fall seen yesterday reflects this.

Yet, I think there is still hope for Rolls-Royce.

This is in part due to the full-year results released a few months ago. A standout figure was the firm’s statutory profit, which for the period was £124m. Given that in the year prior this was a £3.1bn loss, it’s clear to see the progress Rolls-Royce has made post-Covid.

Another factor is increased air travel. Rolls-Royce generates a large proportion of its revenues from servicing commercial jet engines. With passenger volume beginning to edge ever closer to the levels seen pre-pandemic, this should provide a boost for the firm.

However, rising Covid cases, alongside continuing travel problems, mean that passenger volumes may be adversely impacted. As cases continue to rise in places such as China, any future limitations on international travel will negatively impact Rolls-Royce shares.

Where next for Rolls-Royce?

So, where will the shares go next? Despite the issues, I do see promise. The firm has shown it has begun to take strides to get back to pre-pandemic levels. And despite the issues seen, over the long term, demand for travel will continue to rise. For example, easyJet has stated that summer bookings over the past six weeks are above pre-pandemic levels.

However, I think the firm may struggle in the short term as it continues to recover from its Covid hangover. Rising cases, along with the problems we are currently seeing in the travel industry, will most certainly dent investor confidence surrounding Rolls-Royce. Therefore, while I see potential in Rolls-Royce, I’ll only be placing the stock on my watchlist and monitoring its movements over the coming months.

The post Rolls-Royce shares are down 30%! Where are they going next? appeared first on The Twelfth Magpie.

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Charlie Keough has no position in any of the shares mentioned. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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.

Asset management firm JP Morgan is one professional investor that has looked away from the FTSE 100. It has taken advantage of the lower prices resulting from the stock market crash and analysed the new values of many FTSE 250 companies. Renowned for discovering potential profitable opportunities for investment, JPM has recently bought a 5% stake in bus operator National Express (LSE: NEX). 

So what does the top-tier investment bank like about the firm? 

Impressive revenues prior to the crash

National Express reported revenue growth of 9% for Q1 to March. And prior to the coronavirus-induced stock market crash, it was on track for 17% growth.

I think this is impressive and shows how far the firm has come from its more troubled days of 2008/09. Indeed, this journey is reflected in its steadily climbing share price. Over the last five years it outperformed the FTSE 250 before the recent plunge.

Before the stock market crash, National Express was in very good shape and efficiency savings had made a noticeable difference to the firm’s operating margins, which are now over 8%. 

The company has been taking every opportunity to transform itself from a UK-focused business. Up to 75% of its revenues now come from outside the UK, with 45% from North America and 30% from Europe and North Africa. Like many leading FTSE 250 firms, it’s sales base is highly diversified and its business model profitable. 2019 showed a return on capital employed ratio of 9.58. Although still below the industry average of 13, it’s growing and demonstrates improving use of capital.  

The company reassured shareholders recently too. It issued a Covid-19 update saying a great many of its contracts are being honoured and government support was available. Its shares rebounded in response

Year-on-year dividend growth

Sadly, the stock market crash meant that the firm cancelled the April 2020 dividend, in line with many of its FTSE 250 peers. However, prior to this, National Express has produced dividend growth year-on-year for at least the previous half decade. And it had dividend cover of 2 in 2019.

Following the share price crash, National Express currently offers a potential dividend yield of 6.86%. The shares are trading around 233p, and it has a price-to-earnings (P/E) rating of around 8. It’s trading much lower than the fair value many analysts attributed to the FTSE 250 firm prior to the stock market crash. This was around 433p and may suggest National Express is currently undervalued.

It’s easy to see why National Express caught the eye of JP Morgan. I think it’s a great stock to add to a diversified portfolio that could provide you with future value.

The post Stock market crash: like JP Morgan, I’d buy this FTSE 250 bargain! appeared first on The Twelfth Magpie.

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Rachael FitzGerald-Finch 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.

What’s more, there are now some serious concerns that a full-blown banking crisis may take place within Europe, and this is likely to put the brakes on the continent’s already fragile economic recovery.

Unfortunately, it may be the case that banks on the continent are already starting to put the brakes on loan growth. In the past, analysts have linked bank share price performance to loan growth. So falling bank stocks across Europe may already be causing lenders to reconsider loan applications.

International trading giant 

Depressed share prices may also lead to a wave of mergers and acquisitions among the major banks as they try and achieve better returns in a low-interest rate environment. 

There’s plenty of speculation by analysts on Wall Street that banks could be the perfect M&A targets. Barclays (LSE: BARC) is one of the names that keeps coming up again and again. Barclays is one of the few European banks that can compete with its US peers in the field of investment banking. However, the bank isn’t big enough to be able to dominate the European investment banking market and efficiently take on US rivals. This is why analysts believe that Barclays would do well to merge with Deutsche Bank.

Deutsche Bank is another of Europe’s largest investment banks and by combining with Barclays, the enlarged banking group would be able to compete effectively for business with US rivals. Granted, both Barclays and Deutsche have their own problems and are both trying to slim down their investment banks. But by combining, the synergies available could help the banks cut costs faster and more efficiently while being able to achieve additional economies of scale.

Asian exposure 

Standard Chartered (LSE: STAN) is another possible target. It’s a lot easier to believe that Standard could be brought out by a larger peer. Many large US banks would love to have the same exposure to Asia as Standard and after recent declines in the bank’s share price, they would be able to get their hands on this exposure without having to pay a premium. At time of writing, Standard’s market capitalisation is £19.4bn; that’s around 10% of JP Morgan’s market capitalisation of $227bn.

JP Morgan could be a potential acquirer. You see, the US bank has been trying to increase its presence in wealth management over the past few years to reduce its dependence on traditional banking activities, which are producing lower and lower returns. At the same time, Standard has been restructuring its operations to focus on wealth management in Asia as lending in the region becomes riskier. If JP Morgan is looking to get exposure to the Asian wealth management market, Standard could be the perfect bet.

The post After recent declines, are Barclays plc and Standard Chartered plc bid targets? appeared first on The Twelfth Magpie.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.