- Summary:
- Rolls Royce share price hit another all-time high, and there seems to be more fuel in the tank. However, I think its time to tread carefully.
Rolls Royce share price has been on a hot streak this year and the momentum got stronger in September. The share price has risen by 6.3 percent this month, and hit new all-time highs of GBX 528.0 on Monday. In addition, the stock has gained 76 percent year-to-date, underlining a strong bullish hold.
The latest upside is propelled by news that Rolls Royce (LSE: RR.) won a contract to build Small Modular Reactors (SMR) in the Czech Republic. The contract was an important win for Rolls Royce, not just because it beat six other bidders, but also because it was the first such contract from a European Government.
The Czech Republic plans to build 10 SMRs, with each capable of producing 470 MW at a cost of £1billion-£3 billion. The company has a similar contract bid in the pipeline and hopes to take a slice of the UK government’s £20 billion SMR fund.
The Czech SMRs won’t be operational until 2030 and the UK contract decision will likely take four more years to finalise. However, this could open the gates for Rolls Royce to an SMR industry estimated to grow to £73 billion by 2033.
Despite a sharp rise in its share price in the last 52 weeks, some might argue that Rolls Royce is overpriced, with its price-to-earnings (P/E) ratio at 19 as of this writing. However, its order book signal that investments could pay off in the medium and long-term.
Rolls Royce share price prediction
The Money Flow Index (MFI) indicator favours the upside momentum, and Rolls Royce share price will likely keep rising if the price action stays above 525. The first barrier will likely be at 531.6, but extended control by the buyers could break above that level to test 537.0.
Conversely, a move below 525.0 will signal downward momentum, which will likely find initial support at 517.8. If the downward momentum strengthens, it could break below that level, invalidating the upside narrative and potentially testing 512.6.
