The Rolls Royce (LSE:RR) share price plummeted further in 2020. Much has been written about the FTSE 100 aero-engine and luxury car manufacturer and its investment viability for the future.
Rolls-Royce share price woes
The Covid-19 pandemic and economic downturn deepened Rolls-Royce’s woes. With restrictions on travel, the aviation industry has plunged into ruin, in turn affecting the aero-engine arm of RR’s business, which is its primary earner. RR has been struggling with increasing debt, and at the back end of 2020 announced a rights issue to generate cash flow. It also announced 1,400 jobs would be cut from its aerospace division. We are currently in a third lockdown and despite a vaccine being rolled out I am not confident of RR’s recovery prospects just yet.
The Rolls-Royce share price fell more than 50% overall in 2020. At current levels, RR shares can be picked up for close to 100p per share. Forecasted net debt for the end of 2020 stood close to £3.5bn and this is a major concern for me. It is reported that the aviation industry may need the next half a decade to recover from the 2020 downturn. If you couple that slow recovery and RR’s debt levels, I would rather invest my hard earned money elsewhere for a chance of a better return quicker.
FTSE 100 opportunity
Just Eat (LSE:JET) has benefitted from the pandemic and lockdowns which have forced many to stay indoors. Prior to the pandemic, it is reported that between 2008 and 2018 there was an increase of over 500% in UK food orders made online. Between 2011 and 2018, Just Eat saw orders increase from 13.9m to 221m, an increase of almost 1,500%.
Online takeaway is not a new business but JET has strategically navigated atop a tricky industry with many players. Just Eat has consistently invested heavily in its delivery network and technology capabilities to fend off competitors. In addition to that it has regularly made shrewd acquisitions. Forbes estimates the food delivery industry could be worth a staggering $200bn by 2025 and is thriving. This is unlike the aviation industry which is currently crushing the Rolls-Royce share price.
Impressive results and my verdict
JET released a Q4 trading update last week. The fourth quarter marked a third consecutive quarter of growth and order growth of 58% in the UK alone. Delivery orders increased nearly five-fold compared to the same period in 2019. JET expects an over-50% increase in revenue for the year.
JET shares are currently trading at close to 7,900p per share. This is a 43% increase from the market crash bottom of 5,500p back in March 2020. It has recovered well and I believe this trend will continue. Analysts believe JE will record earnings growth of nearly 25% in 2021 and profits will be close to double too.
I would rather invest my cash in JET shares and forget about the Rolls-Royce share price. I’m confident that JET will thrive post-pandemic too. It has a great track record of acquisitions and has a worldwide reach operating in many countries. It also continues to invest heavily in operations aside from acquisitions, which bodes well in my opinion.
The post I’d forget the Rolls-Royce share price! This FTSE 100 stock is one of my top picks appeared first on The Motley Fool UK.
Jabran Khan has no position in any 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.
Motley Fool UK 2021