Rolls-Royce (LON: RR) share price continued soaring this week as the outlook of its business improved. The stock surged to a high of 152.85p, the highest level since March 2020. It has soared by more than 343% from its lowest point since 2020, making it one of the best-performing FTSE 100 stock.
Robust aviation outlook
Rolls-Royce Holdings stock price maintained its bullish trend as investors reacted to the relatively upbeat aviation industry. Recent news in the sector shows that companies in the industry were doing well, which is a positive thing for Rolls-Royce.
The most recent aviation news came from IndiGo Airlines, one of the biggest firms in the sector. In a statement, the Indian low-cost carrier said that it will enter the US and Canadian market through a partnership with Turkish Airlines.
IndiGo has also said that it is considering making a giant 500-plane order as it seeks to grow its business. This is an important development considering that Air India recently made a giant order for Boeing and Airbus planes.
Most of the airplanes being ordered are narrow bodies, a segment that Rolls-Royce exited a while ago. Some analysts believe that the company could re-enter the area in the coming years. At the same time, the company is set to benefit as the flying hours remain robust.
The main catalyst for the Rolls-Royce share price is the recently-announced turnaround strategy by the company. In its financial results, the firm said that it want to boost efficiency and profitability in the coming years.
Some analysts believe that the new strategy will include more layoffs and doing away with some of its most ambitious projects. On Friday, the company said that it was committed to SAF engines, which will be used for Dreamliner:
“SAF combined with more efficient engines remains the only near to mid-term solution for reducing the environmental impact of widebody, long-haul flights” meanwhile, with “80% of the industry’s net zero target”
Rolls-Royce share price forecast
I have been a bit bullish on Rolls-Royce Holdings in the past few months. I explained the reasons for this view in this SeekingAlpha article. Also, I wrote about the company in several articles here. I pointed to the recovery of the aviation industry and the resilience of the defense industry.
On the weekly chart, we see that the stock is approaching the 38.2% Fibonacci Retracement level at 165p. It has also moved above the 25-week and 50-week moving averages while the Relative Strength Index (RSI) has moved above the overbought level.
Therefore, there is still more room for the stock to continue rising, with the next key level to watch being at 200p, which is about 30% above the current level. This psychological level coincides with the 50% retracement point.