The Rolls-Royce share price will be in the spotlight after the company made some progress on its electric plane. Its new program with Boeing will also be a key catalyst. RR shares declined by more than 0.53% yesterday amid a sell-off in UK stocks.
Rolls-Royce and Boeing partnership
Rolls-Royce is one of the biggest UK engineering companies. The firm makes most of its money from the civila aviation industry followed by military contracts and power.
Unlike many aircraft engine manufacturers, Rolls-Royce does not make a lot of money selling engines. Instead, its bread and butter is in the long-term contracts it enters with airlines.
As such, the company was one of the most affected by the coronavirus pandemic as most airlines packed their aircraft. This was made worse by the fact that Rolls-Royce engines tend to be in large aircraft that travel in long routes. Most of these crafts are still packed. Indeed, in the first four months of the year, the number of flight hours was 40% that of its peak in 2019.
Still, there are signs that the Rolls-Royce share price will bounce back as the vaccination process gains steam. Many major countries like the US and Europe plan to open their airspaces later this year. Further, the company is making some progress on many fronts. For example, it is in discussions with Boeing about a new aircraft program. The plane will sit between 737 Max and the smallest 787 Dreamliner.
Further, the firm is developing its all-electric aircraft known as Spirit of Innovation. In a statement yesterday, the company said that the twin-propeller aircraft will start flying in the next few weeks. It also expects to turn cash flow positive in the next half of the year. The CEO said:
“Looking ahead, we are confident that the significant restructuring actions we have taken in 2020 will deliver permanent cost reductions, positioning us well for the rebound in international air travel.”
Rolls-Royce share price forecast
The daily chart shows that the RR share price has been in a tight range in the past few days. The shares are hovering around 100p. It is also at the same level as the 100-day and 50-day exponential moving averages.
A closer look at the chart shows that it is forming an inverted head and shoulders pattern. In technical analysis, this is usually a bullish sign. Therefore, while the consolidation will continue for a while, there is a possibility that the shares will bounce back higher. If this happens, the next level to watch is the year-to-date high of 135p.