Rolls Royce Holdings Share Price Forecast September 2021 – Time to Buy RR?
Shares of British multinational aerospace and defense company Rolls-Royce Holdings (LSE: RR) are in the green today after closing at £126.94 as of September 23rd (18:01 UTC+1). RR shareholders have enjoyed an unusually good week as the shares are leading in the FTSE 100. RR shares have risen 14% since the market close on Friday which builds on its overall year-to-date increase of 14.3%. While the shares have fallen by more than 50%, the latest progress has interested investors who are wondering whether it’s the right time to buy RR.
Rolls Royce Holdings – Technical Analysis
The financial statement from Rolls Royce Holdings reveals a market cap of £10.622 billion with total assets worth £28.755 billion. Revenue for 2020 was at £11.82 billion with a profit margin of -26.81% compared to £16.59 billion the year before.
Moving averages for Rolls Royce Holdings are mostly indicating a buy action as evidenced by Exponential Moving Average (100)(108.12), Simple Moving Average (100)(106.77), Exponential Moving Average (200)(108.40) and Simple Moving Average (200)(107.00). Oscillators such as Relative Strength Index (14)(71.48), Stochastic %K (14, 3, 3)(98.05), Commodity Channel Index (20)(232.61) and Average Directional Index (14)(17.77) are neutral.
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Recent Developments
U.S. authorities have started loosening restrictions earlier imposed on UK flyers but they still need proof of Covid-19 vaccinations. Big airlines such as Aer Lingus and British Airways can slowly start to resume their transatlantic flights which are a huge source of revenue for them. With it, demand for engine maintenance will certainly boost the RR share price.
Rolls Royce recently sold its 23.1% holdings in AirTanker which should generate about £189 million expected to be completed by the first quarter of next year. The appointment of Anita Frew as the new chairman can see the company go into a different strategic direction, which could make investors excited about the RR share price. The company is also involved in a consortium that wants to produce nuclear reactors as well as other opportunities for renewables.
Last year, Rolls Royce reported an earnings loss which means investors do not have any information for 2020’s P/E ratio. Investors should hope that the company can get back to its 2019 earnings level in the next five years. According to US planemaker Boeing, the aviation industry is expected to reach its pre-pandemic levels by late 2023 or early 2024. This is fine for any long-term investors of RR.
Should You Buy RR Shares?
In a scenario where RR gets back to its 2019 earnings level, the P/E multiple would be 23 if we consider the current share price. Along with rising debt, investors should note that the company was already going through a tough patch before the pandemic arrived. 2021’s net debt stood at £3.1 billion, which would take its enterprise value to somewhere around £13.6 billion. This is also the total amount one would have to pay to buy the whole company and pay off existing debt.
There are many reasons for long-term investors to be optimistic about RR. The company can rerate itself once it improves its balance sheet. Its defense earnings are also reliable and stable. The recent submarine deal concluded between the UK, US and Australia can serve as a big boost for the company. While there is a good chance that RR shares will end the year at a level significantly ahead of today, there are too many uncertainties to consider. Investors should exercise caution when buying into a company emerging from economic hardships with a fairly high valuation.
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Rolls Royce Share Price Bullish Breakout Suggests More Upside Ahead
The Rolls Royce share price surged 30% from last week’s lows to complete a stunning technical breakout, which could continue this week. Friday’s closing price of 132.50p not only marked the seventh straight day of gains for Rolls Royce (LON: RR), it was also the highest close in 2021. Furthermore, it pushed the share price beyond the resistance that has capped it all year, which could set Rolls up nicely to motor even higher.
The tide has been turning for engine maker Rolls Royce recently. The world is starting to readjust back to normality in the wake of the covid pandemic. Many countries have opened their borders for vaccinated tourists, and vacationers have made up for the lost time. The most significant lift for aviation-related stocks came last week when the US finally announced it would open its border for double-jabbed travellers. The news led to an immediate upgrade from Berenberg bank who lifted their 12-month price target for the rolls Royce share price to 160p from 150p. As a result, RR has broken out on the upside, which could fuel more buying.
RR Technical Breakout
The weekly chart shows that Rolls has been trading in a rising triangle formation for 12 months. Last week’s rally, which burst through the top edge of the pattern at 120p, also lifted RR above its 100-week moving average. Technically speaking, on the long term chart, Rolls Royce has the potential to advance to the June 2020 high at 146p. Furthermore, an extended rally could lift the share price above 200p and towards the 200-week average at 216p.
Of course, in reality, a 200p target is overly optimistic considering the challenges ahead. However, in saying that, as long as RR remains above the former trend resistance at 118p, the outlook is incredibly constructive. Therefore, even though Rolls Royce jumped 20% last week, I maintain a bullish stance as long as the price stays above 118p.
Rolls Royce Share Pirce
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Rolls-Royce Share Price Forecast: The Sky is The Limit
The Rolls-Royce share price has jumped in the past four consecutive days as outlook for the company improved. The RR stock rose to 121p, which was substantially above this month’s low of 100p. Other aviation-related stocks like IAG and Ryanair have also rebounded.
Why the RR share price is rising
There are three main catalysts for the performance of the Rolls-Royce share price. First, investors are cheering the recent nuclear deal among the US, UK, and Australia. The deal will see the US and UK share technology with Australia in a bid to build nuclear submarines.
Before the AUKUS deal, Australia had signed a deal with France. Therefore, investors believe that Rolls Royce, as a leading engine manufacturer, it will benefit from the deal. Other companies that could benefit are BAE Systems, General Electric, and other American defense contractors.
The stock is also rising because of positive signs about the aviation industry. In a statement this week, the United States announced that it will start allowing foreign travellers provided that they were immunized. Travellers will also need to demonstrate that they don’t have Covid.
Analysts believe that vaccination and testing will help the aviation industry to recover. As it does, Rolls-Royce will benefit because it makes most of its money from long service contracts.
Third, there is a general feeling that Rolls-Royce is a relatively undervalued company. In my past Rolls Royce share price forecast, I wrote that the stock was about 35% undervalued. Therefore, there is a likelihood that more investors will buy the shares as they bet on the recovery of the aviation industry.
Rolls-Royce share price forecast
The daily chart shows that the Rolls-Royce stock price has been supercharged lately. It has moved above the important resistance level at 114p, which was the highest level in May and June. This is a bullish signal. Also, the stock has moved above the 25-day and 50-day moving averages and formed a bullish inverted head and shoulders pattern.
Therefore, for now, the outlook of the stock is bullish, with the next key level to watch is at 128p, which was the highest point on March 18.