Rolls-Royce shares are up 54% in a month! Here’s what I’d do with them today

first_imgSimply click below to discover how you can take advantage of this. After the Covid-19 pandemic spread across the globe in early 2020, airline traffic collapsed to a level unseen in the modern era. With governments closing their borders and imposing quarantines, airline miles flown dropped to near-zero. Even now, flight numbers are at roughly a quarter of their previous highs. This crash has devastated shares in Rolls-Royce Holdings (LSE: RR). What might lie ahead for Rolls-Royce shares?Rolls-Royce shares plunge to earthLess than 11 months ago — in a world before Covid-19 — Rolls-Royce shares were riding high. They hit a 52-week peak of 792p on 7 November, then slipped to end 2019 at 683.2p. Even as recently as 12 February, the stock closed at 699p. Then, as coronavirus worries spurred national lockdowns, Rolls-Royce went into a tailspin. Shares in the maker of engines and power systems collapsed to 251.6p by 3 April, driven down by relentless selling pressure.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…As the spread of coronavirus slowed going into the summer, Rolls-Royce shares staged a partial comeback. By 8 June, there were trading within a whisker of £4, a decent bounce-back, yet still just over half of their November peak. Alas, with Covid-19 infections surging into the autumn, the Rolls-Royce share price crashed again, bottoming out at 100.8p on 2 October.Rolls-Royce shares more than doubled this monthSince the start of this month, Rolls-Royce shares have been on a spectacular tear. On Friday, they closed at 243.7p, up a whopping 141.7% in just three weeks. This huge surge has propelled the esteemed engineering firm’s market value to £4.7bn. Nevertheless, Rolls-Royce stock has dived by two-thirds in the past 12 months, leaving the company a shadow of its former self.Any investors astute or lucky enough to buy Rolls-Royce shares around the turn of this month will be sitting pretty on some extremely healthy profits. But will these last, given the existential crisis faced by the airline industry?This FTSE 100 firm faces a tough futureOne problem for the UK’s leading engineer is that it was already stumbling before the shock of Covid-19. Indeed, in the far better economic circumstances of 2018 and 2019, the business lost £2.947bn and £891m respectively. What’s more, most of its profits come from long-term maintenance contracts linked to hourly jet-engine usage. With airlines on their knees, Rolls-Royce will struggle for years to come, with normal conditions unlikely to return before 2024.A warning from the bond marketWith its earnings crushed and dividends vanished, it’s impossible to value Rolls-Royce shares using conventional metrics. However, one red flag for shareholders comes from the bond market — which takes no prisoners and bosses even the biggest businesses about!On 14 October, Rolls-Royce issued £2bn of bonds, as part of a rescue fundraising that also included a rights issue for shareholders. The coupons (yearly interest rates) paid by these six/seven-year IOUs ranged from 4.625% to 5.75%. In 2017, the firm was able to borrow for six years at 0.875% a year. Today, similar high-yield (‘junk’) debt would be sold with an average coupon below 3.75%. Thus, ‘bond vigilantes’ — worried about Rolls-Royce’s future liquidity, solvency and survival — demanded steep returns to lend to the battered business.In short, with airlines facing powerful headwinds, I can see Rolls-Royce again returning to shareholders (and/or bondholders) for more emergency bailouts. With the business set to survive, but not thrive, if I held Rolls-Royce shares, I’d sell them today. As a shareholder, I’d head for the emergency exits while the going was good! Renowned stock-picker Mark Rogers and his 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. 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. Rolls-Royce shares are up 54% in a month! Here’s what I’d do with them today “This Stock Could Be Like Buying Amazon in 1997” See all posts by Cliff D’Arcy I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.center_img Our 6 ‘Best Buys Now’ Shares Cliff D’Arcy | Sunday, 25th October, 2020 | More on: RR Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Enter Your Email Address Image source: Getty Images. Cliffdarcy 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. 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