Rolls-Royce share price forecast after hitting a record high

Rolls-Royce’s (LON: RR) share price continued its strong comeback this week after the company published strong results and forward guidance. It surged to a high of 446.6p, its highest level on record. It has risen by over 1,133% from its lowest level in October 2020, giving it a market cap of over £37 billion.

Firing on all cylinders

Rolls-Royce Holdings is firing on all cylinders, helped by all its divisions. In a statement, the company said that expects to deliver strong results this year despite the ongoing headwinds in the civil aviation industry.

It has also continued to reduce its debt, which has led to upgrades by the major credit ratings agencies. In just a few years, it has managed to move from a junk company to an investment-grade organisation. It has even reduced its debt by paying its £500 million bond recently.

The most recent financial results revealed that Rolls-Royce’s statutory revenue rose to £16.48 billion in 2023 while its profit for the year came in at £2.4 billion. These numbers were big increases from the £12.6 billion and £158 million revenue and profit it made a year earlier. 

The company now expects that its underlying profit will be between £1.7 billion and £2 billion this year while free cash flow will be between £1.7 billion and £1.9 billion. In the medium term, Rolls-Royce has guided that its operating profit will be between £2.5 billion and £2.8 billion while the free cash flow will be between £2.8 billion and £3.1 billion. The CEO said:

“We are driving growth, delivering contractual improvements and improved margins, unlocking efficiencies and creating value across the Group. We have had a strong start to the year, despite continued industry-wide supply chain challenges.”

Rolls-Royce is also moderately undervalued compared to GE Aviation. It has a price-to-earnings ratio of about 15 while GE has a multiple of 18.8. These multiples are lower than the FTSE 100 and S&P 500 averages of 18.9 and 21, respectively.

Therefore, there is a possibility that Rolls-Royce’s share price will continue doing well in the longer term. This will happen if the management continues to execute well and barring any major supply chain disruption issues.

Rolls-Royce share price forecast

RR chart by TradingView

The weekly chart shows that the Rolls-Royce stock price has been in a strong uptrend after bottoming at 32.37 in March 2020. It has now soared above the key resistance level at 380p, its highest swing in July 2018, and 443p, its previous highest level on record.

The stock has constantly remained above all moving averages, signaling that bulls are in control. The MACD, Relative Strength Index (RSI), and other oscillators have all moved to the overbought level, meaning that it has a bullish momentum, Therefore, the stock’s outlook is bullish, with the next level to watch being at 500p.

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