The Rolls-Royce share price remains at its all-time high as investors assess whether its spectacular rally in the past few years. Its stock was trading at 600p, bringing the 12-month gains to near 100% and its market cap to over $68 billion. It has become the 15th biggest company in the UK.
So, can the Rolls-Royce stock price continue rising after forming an ascending triangle chart pattern on the daily chart?
Rolls Royce share price has thrived
The company has experienced a strong turnaround in the past few years as demand for its products and services rose. Management’s cost-cutting measures and major macro themes, including wars, the ongoing travel boom, and the energy supercycle, also benefited the company.
The company has slashed costs in billions in the past few years by laying off workers and either selling or shutting off some of its least profitable businesses.
It is also benefiting from the ongoing travel boom after the COVID-19 pandemic that has helped push airline stocks like United Airlines and IAG to their multi-year highs.
The ongoing wars in the Middle East and Europe and the growing tensions between the United States and China have increased demand for defense products. This is notable since the company manufactures products in air combat, submarines, and space.
Most recently, Rolls-Royce has positioned itself as the leading player in the nuclear energy industry, which is making a big comeback. The UK plans to use its technology to launch multiple small modular reactors (SMRs).
SMRs are in high demand because of the artificial intelligence industry that is seeing robust growth. Just on Tuesday, Donald Trump unveiled a $100 billion investment from Softbank, OpenAI, and Oracle. The plan will fund AI infrastructure in the US, including data centers and campuses.
Many data center companies are considering using modular nuclear power plants, which are small and cheaper to operate long-term.
The most recent results revealed that Rolls-Royce’s business was doing well. Its operating profit rose by 74% in the year’s first half, while its operating margin improved to 14%.
Rolls-Royce’s free cash flow rose by 225% to £1.2 billion, while the return on capital was 13.8%. Management wants to continue the trend of increasing operating margins. The civil aviation division’s operating margin rose to 18%, a 5.6% increase. Defense and power systems had operating margins of 15.5% and 10.3%, respectively.
The next catalyst for the Rolls-Royce share price will be the upcoming GE Aviation earnings which will provide more information about the state of the aviation industry. GE’s earnings are notable because the two companies operate in the same industry and are affected by the same factors.
Rolls-Royce will then release its full-year results on February 27. Based on the recent trading update, the management noted that the full-year numbers will be in line with guidance. This means that the company expects to make an operating profit of between £2.1 billion and £2.3 billion and free cash flow of between £2.1 billion and £2.2 billion.
Rolls-Royce share price analysis
RR chart by TradingView
The daily chart shows that the RR stock price has been in a strong uptrend for a long time. It has found a strong resistance at 600p. The stock has formed an ascending triangle chart pattern, a popular continuation sign. This pattern is made up of a horizontal line and an ascending trendline.
The Rolls-Royce share price has remained above the 50-day moving average. Therefore, the stock will likely continue rising in the near term because of the triangle pattern. If this happens, the next point to watch will be at 650p.
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