This is what I think the Rolls-Royce share price could look like at the end of 2024

How long will it take until the Rolls Royce Holdings (LSE: RR.) Will the share price reach 300p, 400p or 500p? That's what many of us have been wondering over the last 12 months.

The answer was always the same: sooner than we think.

Rolls has already been above 500p and is currently hovering around that level, so how soon will we see 600p?

I'm going to go out on a limb and say I don't think the price will rise that much this year. In fact, I see a good chance that Rolls-Royce could end 2024 significantly lower than it is today.

Guessing

Let me clarify. Guessing which way a stock price might go in the short term is not a good way to choose an investment. People who try it are generally wrong as often as they are right.

So I'm not really making any predictions here. This is all just for fun and based on past experience with growth stocks and some instincts about what might happen. And I'm not going to let my chronic inability to predict stock prices deter me.

In fact, I believe that Rolls-Royce could be a good long-term investment right now. Even after the stunning price increase. And even if the price should fall in the short term.

The good stuff

Why am I optimistic about the long-term future? With the share price up around five pounds, we expect a price-to-earnings (P/E) ratio of 28.

Yes, that is about double the long-term FTSE100 Average. But we could lower that to 22 based on projections for 2026. And if the growth outlook remains as good as it is now, that could prove to be a good deal.

On the other hand, the PEG ratio is a popular way to compare P/E valuation with expected earnings growth. Investors like it to be below one, ideally below 0.7. However, for 2025, Rolls has it at 2.4.

This could mean that growth expectations are already too high in the share price.

Feeling

My main reason for believing that the Rolls-Royce share price could fall before the end of the year is investor sentiment, and that is based on years of experience with growth stocks when I was younger.

The story continues

At some point, growth (or just expectations) will slow down. This is inevitable, otherwise a company could eventually become infinitely large.

A slowdown in growth has almost always meant a downward correction in the share price, at least for the growth stocks I have observed.

This may take several years, or expectations may decline at the next quarterly update.

Stock exchange

There is another factor: falling interest rates and better prospects for financials and other securities.

If I had bought Rolls-Royce before the price shot up, I would probably try to take some of the profit and invest it in banks, insurance companies or construction companies while they are still cheap. Others may well do that.

But maybe in the end I just want a fall and a new buying opportunity to make up for all the missed opportunities.

The post “Here’s what I think Rolls-Royce’s share price could look like at the end of 2024” first appeared on The Motley Fool UK.

Further reading

Alan Oscroft does not own any of the stocks mentioned. The Motley Fool UK has recommended Rolls-Royce Plc. The views expressed on companies mentioned in this article are those of the author and may therefore 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.

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