Can the Rolls-Royce share price keep soaring?
After a brilliant 2023, is there more upside for engine maker Rolls-Royce?
Stellar Share Price Performance
Last year was a phenomenal one for Rolls-Royce shareholders. The company's share price more than tripled, making it the best performer in the entire FTSE 100 index for 2023.
The momentum has carried over into the new year, with Rolls-Royce shares already up another 43% year-to-date in 2024 so far. This raises the question of whether such a blistering rally can keep going.
Part of the big share price rise was due to a low base effect after several years of declines. When a stock has fallen significantly, even just a return to prior levels can produce very large percentage gains. Rolls-Royce shares had been depressed by the impacts of the pandemic on the aviation industry it serves.
Business Turnaround
In addition to the low base, improving fundamentals at Rolls-Royce underpinned the rebound, as the company returned to profitability in 2023 after pandemic-related losses. A cost-cutting program boosted margins, while a recovery in flight hours increased revenues.
However, while a positive, the revenue recovery at Rolls-Royce merely returned it to pre-pandemic trendline growth levels. The top-line has not yet shown dramatic outperformance above its historical growth trajectory.
The key driver of the surge in Rolls-Royce shares seems to be optimistic expectations of much higher profits ahead, rather than what has been achieved so far in its business performance.
Ambitious 2027 Targets
Fuelling those rosy expectations are the stretched financial targets set out by the CEO for 2027, including underlying operating profit of £2.5-2.8 billion and free cash flow of £2.8-3.1 billion. That would continue to drive optimism on earnings for the group, though the lofty goals could mean that the journey from here is more volatile.
Analyst ratings for Rolls Royce
LSEG data shows a consensus analyst rating of ‘buy’ for Rolls Royce with 4 strong buy, 10 buy, 3 hold and 1 sell – and a mean of estimates suggesting a long-term price target of 443.44 pence for the share, roughly 3% higher than the current price (as of 2 April 2024).
Technical analysis of the Rolls Royce share price
Rolls Royce’s share price remains on track for its January 2014 all-time high at 444.10p, judging by the swift near 530% ascent it has seen from its September 2022 low.
The British multinational aerospace and defence company’s share price is trading within 3% of its record high, above which beckons the 450p mark ahead of the major psychological 500p mark.
Rolls Royce Monthly Candlestick Chart
On the daily chart the Rolls Royce share price, which has already risen by close to 45% year-to-date, continues its stellar advance at break neck speed.
Rolls Royce Daily Candlestick Chart
Tuesday’s rise above its March high at 429.7p is another stepping stone towards its record high at 444.1p, made in 2014.
While the October-to-February uptrend line at 415.7p and Thursday’s low at 411.4p underpin, the strong short-term uptrend will remain intact.
For long-term bullish momentum to be maintained, the Rolls Royce share price should remain above its mid-March low at 378.5p.
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