My Bullish Thesis

CEO ("Warren East")

Warren East was the CEO of Texas Instruments, for 11 years, and CEO of ARM, a British semiconductor and software design company. East joined Rolls Royce in 2014 and became CEO soon thereafter in July of 2015. He is "Commander of the Order of the British Empire!" ("CBE") Holy moly! That's quite a title! He's no knight like Sir Richard Branson of partner company, Virgin Galactic, but Commander is still pretty cool. 😎 

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The Bull Thesis

Rolls Royce trades on the Over-the-Counter ("OTC") market, but it is easily purchased over Robinhood or any other brokerage. 

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Preferred Shares

RLLCF - These are the Preferred Shares these are not offered on Robinhood, but you can purchase them through Fidelity or another brokerage1 If you want to own the preferred shares of the company I think that would also be a worthy investment. Either way, no matter what you invest in here you will be investing in Rolls Royce.

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Common Shares

RYCEY - This is the ticker that I recommend that you buy.

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Dont Buy these

RYCEF - I don't recommend you buy these shares.

RYCRF - I don't recommend you buy these shares.​

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Business Model - Rolls Royce is a British engineering company, they have a partnership with Virgin Galactic. The company makes jet engines for Boeing and Airbus (two other companies that have been struggling because of the Boeing 737 crash as well as travel being down due to COVID-19). The Boeing 737 max crashed because of a software failure not because of an engine failure.

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Rolls Royce sold the car side of their business to BMW in 2003 and the company still manufactures their cars and if you check them out they look pretty cool! https://bit.ly/3hfBEQi

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Valuation - RYCEY traded at $1.50, prior to February 21, 2020, (the date of the initial COVID crash) the stock used to trade for a little less than $10. On the LON exchange the stock trades under the ticker RR. RR trades for 110 GBX = $1.44.

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Short Interest - In February of 2021 the stock had over 8 billion shares shorted (about 100% of the company). Now the short interest is not high enough to be a factor. I think shorts will return to the stock as the price rises, but we will see.

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Prediction - I think the stock is worth at least $3 (more likely $10-15) and if a short squeeze comes possibly a lot more ($20-60).

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The Bear Thesis

Sometimes companies do go out of business - Companies do go in and out of business all the time. Sometimes companies get taken private, delisted, or go bankrupt. These are all scary words as well as possibilities for a business. I do not think that Rolls Royce will go bankrupt. Here's why.

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The company has been struggling, but their last profitable year wasn't too long ago in 2019. The company has always made quality, luxury engines from what I can tell and will continue to do so for the foreseeable future. Their partnership with Virgin Galactic will allow them to transition well into the future.

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If you are wondering how a jet engine maker makes enough money consistently over the year to sustain its workforce as well as pay the rent and keep the lights on. The company is paid per jet engine sold as well as per hour of flight. That's right, every hour one of the company's jet engines is in flight they 

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COVID-19 - At the time that this thesis was written, Britain has distributed vaccines to about 48% of its population, the United States is about 46% vaccinated, China has distributed 1.17 billion doses of the vaccine, Germany has distributed vaccines to about 35% of its population, Spain has vaccinated 33% of its population, and Chile has distributed vaccines to about 54% of its population.

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Since COVID-19 is getting better and will likely continue to get better into the future, I believe that Rolls Royce's profits will return and we can see the glory days of $20+ once again. As the pandemic ends, travel restrictions should loosen and there will be more jet engines in the air which is a large source of revenue for Rolls Royce. Also, with planes being grounded for long lengths of time, engines cold and Boeing and Airbus will need to purchase new engines which should bring in more profits.

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Conclusion

Rolls Royce is priced for bankruptcy, and although the company is seeing rough times and the stock is trading at all time lows, I believe that wall street hasn't caught on to the fact that there is a windfall heading Roll's Royce's way yet. Additionally, it is one of the last stocks that was heavily hit by COVID-19 that has yet to recover. I am holding about 3,000 shares I will buy this stock anywhere under $3 all the way to $0.