Is the Rolls-Royce share price too cheap in October?

By:
on Oct 11, 2022
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  • Rolls-Royce share price has been in a strong bearish trend this year.
  • Its fundamentals seem good as its key segments make a comeback.
  • Technically, the stock will likely continue falling in October.

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Rolls-Royce (LON: RR) share price has been in a strong bearish trend in the past few months as investors worry about costs and the aviation sector. The stock crashed to a low of 70.76p, which was slightly above the year-to-date low of 65p. It has plummeted by more than 52% from its highest level in 2021. 

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What’s the catalyst for RR?

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Rolls-Royce Holdings is a leading player in the aviation, power, and defence industries. The firm makes most of its revenue from the civil aerospace industry. In 2021, the division made more than 4.5 billion pounds, mostly through long-term servicing contracts. The company’s defence segment made over 3.36 billion pounds followed by 2.76 billion it made in the Power Systems.

Rolls-Royce share price has struggled in 2021 even as its all businesses make a strong recovery. For example, the transport and tourism industries are nearing their pre-pandemic levels. As a result, the company is making substantial revenue by servicing existing jets.

At the same time, its defence industry has done relatively well as the crisis in Ukraine continues. As a result, demand for its products is rising as countries continue raising their defence budgets. Analysts believe that it will continue doing well in the coming months.

Similarly, with the world facing an energy crisis, analysts believe that the company will do well as demand for its products rise. For example, the firm is seeking approvals to build small nuclear reactors in the UK.

Another potential catalyst for the Rolls-Royce stock price is the strong US dollar. The dollar has surged by more than 20% this year. This is notable since Rolls-Royce reports in the British pound while it does most of its business in the US dollar. 

Meanwhile, there is a likelihood that the company may get a huge Bell V-280 helicopter contract. If this happens, the company could pick between $8-$10 billion.

Rolls-Royce share price forecast

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Rolls-Royce share price

The daily chart shows that the RR share price has been in a strong bearish trend in the past few months. It has crashed below the important support level at 77.72p, which was the lowest level in May this year. It has remained below this support and is below the 25-day and 50-day moving averages.

The MACD has moved below the neutral level. Therefore, there is a likelihood that the stock will continue falling in October as sellers target the next key support at 60p. In the long term, however, the stock will likely rebound.

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