Is the Rolls-Royce share price a bargain after crashing 13%?

first_img “This Stock Could Be Like Buying Amazon in 1997” Simply click below to discover how you can take advantage of this. See all posts by Kirsteen Mackay Image source: Getty Images Kirsteen Mackay | Wednesday, 5th August, 2020 | More on: RR 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. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Is the Rolls-Royce share price a bargain after crashing 13%?center_img Our 6 ‘Best Buys Now’ Shares 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. Enter Your Email Address FTSE 100 engine manufacturer Rolls-Royce Holdings (LSE:RR) is having a tough year. The coronavirus pandemic brought airlines screaming to a halt, putting parts and repairs on hold. This immediately affected Rolls-Royce, creating unparalleled challenges for the company. The Rolls-Royce share price is down 13% in the past month and 65% year-to-date. Unfortunately, a further slide seems likely.Power-by-the-HourThe Rolls-Royce income model is unusual. Power-by-the-Hour, a Rolls-Royce trademark, was conceived in 1962. It means the company sells its engines at a loss, making its money from aftercare service. This guarantees the buyer a quality service and engines that perform well, while the firm enjoys a steady income based on hours flown. It is a model that worked well for over 50 years, but the pandemic has seen it come crashing to a halt. The business is now haemorrhaging money as the costs to continue far outweigh the money flowing in. Illustrating why the Rolls-Royce share price is suffering so badly. 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…£1.5bn rights issueFinancial analysts examining the company have warned that it could need to raise a minimum of £6bn to get through the crisis. Ratings agency Moody’s downgraded the Rolls-Royce credit rating to Junk at the end of July, which makes it much more difficult to borrow sizeable sums of money. As a business that requires large amounts of cash to operate, it is resorting to a rights issue to shore up its funds.A rights issue is basically a share placing, diluting the existing shares, by introducing a batch of new ones. These are offered to existing shareholders, giving them the opportunity to own more of the company at a lower price. In its upcoming rights issue, scheduled for September, it hopes to raise £1.5bn to improve its balance sheet and help recovery from the pandemic-induced aviation crash.It is also considering putting its Spanish turbines manufacturer, ITP Aero, up for sale. From this, it would hope to raise around £1bn. Prior to this it already cut 9,000 jobs and cancelled its dividend, both of which further hammered the RR share price.Rolls-Royce share price woesAlthough the airline business is struggling, Rolls-Royce is a world-leader in other areas of manufacture. I like that it is heavily involved in Artificial Intelligence, which is a business for the modern age. If it can get its financial worries under control, then I think it still has a lot going for it.Geopolitical tensions, on heightened alert for years, now appear to be escalating. This benefits the Rolls-Royce defence division, which continues to receive government orders. There is clearly a lot of concern surrounding how it can get back on track, but I will be very surprised if this company goes under.This may make the shares a tempting bargain at current prices. However, with the rights issue ahead, I imagine they have further to fall. I would wait until later in the year before considering buying any shares. Kirsteen 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. 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.last_img read more