Rolls-Royce share price had another successful month in April as it jumped to a record high of 1,111 GBX. It then pulled back to the current 1,070p as some investors started to book profits. This article explores whether the stock has more room to run in September.
Top Rolls-Royce news in August
Rolls-Royce Holdings had major news in August this year. The most notable one was its first-half financial results, which demonstrated its strong growth was continuing, helped by its three divisions: civil aviation, power, and defence.
Rolls-Royce’s underlying revenue rose to £9 billion in the first half, up from £8.1 billion in the same period last year. Its profit before tax rose to £1.69 billion, while the free cash flow jumped to £1.58 billion.
The civil aviation division revenue rose by 17% to £4.78 billion, while the defence and power systems rose to £2.2 billion and £2.04 billion. These numbers were much better than its guidance and what analysts were expecting.
Most importantly, the company also boosted its mid-term targets. It now expects that its underlying profit it 2028 will be between £3.6 billion and £3.9 billion. The operating margin will be between 15% and 17%, while the free cash flow will be between £4.2 billion and £4.5 billion.
The other notable news that happened was a report by the FT that the company was considering fundraising for its small nuclear reactor business. In its report, which cited people with knowledge on the issue, the FT noted that an IPO was also under consideration.
While the company has denied the reporting, it is likely that it will ultimately launch an IPO for the business as the SMR business booms. In the United States, companies in the space have surged in the past 12 months. Oklo stock has soared by 1,000% in the last 12 months, while NuScale Power has jumped by 330%.
In a statement to the BBC, Tufan Erginbilgic, said that the nuclear business has a chance of making it the biggest company in the UK as the world will need 400 SMRs by 2050, with each costing about £3 billion. He said:
“There is no private company in the world with the nuclear capability we have. If we are not market leader globally, we did something wrong.”
Looking ahead, Rolls-Royce stock price will react to its investor roadshow in the United States, where the management will speak to its biggest investors and make the case for its share. It will happen on Tuesday, Wednesday, and Thursday this week.
Rolls-Royce share price technical analysis
RR stock chart | Source: TradingView
The daily chart shows that the Rolls-Royce stock price has been in a strong bull run this year. It jumped to a high of 1,111p in August and then pulled back to 1,070p.
Rolls-Royce remains above the 50-day and 100-day Exponential Moving Averages (EMA). However, it has formed a bearish divergence pattern as the MACD and the Relative Strength Index (RSI) have continued moving downwards.
The stock has also formed an island reversal pattern as it has consolidated after ut gap-up after earnings. Therefore, the stock will likely pull back and possibly retest the support at 1,000p. A move above the resistance point at 1,111p will invalidate the bearish forecast.
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