The Rolls-Royce share price continued its strong surge this week as it reached a new all-time high. It soared to 900p, up by over 2,518% from its lowest point during the pandemic, as it became one of the biggest British companies globally. This trend means that it may soon hit 1,000p as we have predicted several times.
China as a big catalyst for Rolls-Royce share price
Our last article on Rolls-Royce Holdings identified China as a potential catalyst for the stock. In that article, we noted that Comac, China’s aircraft manufacturer, may turn to the company for engines as tensions with the US rise.
A likely scenario is where the Trump administration will ban General Electric and other American companies from supplying engines and parts to Comac. The goal will to enable Boeing maintain a market share in the aviation industry.
The challenge, however, is that Rolls-Royce Holdings manufactures engines for wide-body aircraft. It has no presence in the narrow-body sector after it abandoned the business a few years ago.
Rolls-Royce has hinted that it will want to return to the narrow-body industry in the future. However, building a new engine from scratch may be a big challenge and take over 6 years to complete.
China Airbus orders
China is a big catalyst for the Rolls-Royce share price as its airlines focus on buying Airbus planes. Indeed, no major airline has made a big Boeing order in the past few years.
Now, Bloomberg is reporting that China is considering a big bid for Airbus planes, a deal that may be announced next month when EU leaders visit Beijing to celebrate long-term ties. The platform reported that the orders could be between 200 and 500.
Bloomberg notes that the potential orders will be spread between wide-body and narrow-body planes. Rolls-Royce Holdings engines power most of Airbus’ wide-body engines, making it a big beneficiary of such a deal.
However, Rolls-Royce gains in this order will take time to materialize because of Airbus’ backlog, which stands at over 8,000 planes. This means that any orders could be delivered in the next decade.
Civil aviation is an important market for Rolls-Royce Holdings, a company that sells engines and then takes long-term service contracts. This division accounts for over 50% of its total revenue.
Rolls-Royce is also benefiting from the other two divisions: power and defence. Its power business is benefiting from the ongoing AI boom, while the defence business is a top beneficiary as European and American governments boost their defense spending.
At the same time, the management has focused on making Rolls-Royce a leaner and more profitable company. Indeed, it achieved its mid-term targets in 2024, two years ahead of schedule.
Rolls-Royce share price analysis
RR stock chart by TradingView
The daily chart shows that the RR share price has been in a strong uptrend in the past few years as the company’s growth resumed. It recently moved above the key resistance level at 810p, invalidating the double-top pattern that was forming. A double-top is one of the most bearish patterns in technical analysis.
The stock remains above the 50-day and 100-day Exponential Moving Average (EMA), a sign that bulls are in control. Also, the Relative Strength Index (RSI) and the MACD indicator have all pointed upwards.
Therefore, the Rolls-Royce share price will likely continue soaring, with the next point to watch being at 1,000p. The bullish outlook will only become invalid if the stock drops below the support at 850p.
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