Rolls-Royce share price: A potential catalyst emerges
- Rolls-Royce stock price drifted higher as investors waited for important aviation news.
- Riyadh Air and Saudia are expected to announce a big order of Boeing Dreamliner.
- Analysts believe that Rolls-Royce engines could power some of those planes.
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Rolls-Royce (LON: RR) share price jumped by more than 1% on Wednesday as the market reflected on the strong demand for airplanes that could positively impact its civil aviation business. The stock rose to 147.42p, which was slightly above this week’s low of 141.25p.
Saudi Arabia could order 80 Dreamliners
The most recent important news came from the Wall Street Journal. In an exclusive report, the paper said that Saudi Arabia was considering making a large purchase order of 80 Dreamliners with an option for 40 more. With a sticker price of $300 million, the total deal will be worth about $24 billion. If Saudi decides to take 120 planes, the order will be worth over $36 billion.
It is still unclear whether the order will be made. If it is, it will be for the newly launched Riyadh Air, which was launched during the weekend by the Public Investment Company (PIC). Other planes will go to Saudia, the country’s flagship courier.
Also, it is unclear whether Saudi Arabia will prefer engines from General Electric or Rolls-Royce. All Dreamliner planes have a choice of either Rolls-Royce Trent 1000 or General Electric’s GE9X.
In the past, Saudia has preferred using engines made by General Electric. However, there is also a possibility that the two airlines will order some Rolls-Royce engines. Rolls-Royce has recently rolled out Trent 1000 engines that run on a 50% sustainable fuel blend. Therefore, they will likely give it a try.
Other companies have recently made huge orders for Boeing and Airbus aircrafts. In December, United Airlines announced that it would order 100 Dreamliners. A small portion of these engines could come from Rolls-Royce as well. Air India has also announced a large order for narrow body aircraft, signaling that operators are still bullish on the sector.
Rolls-Royce share price forecast
So, is it safe to buy Rolls-Royce shares? In my article on Rolls-Royce last week, I noted that the stock will likely continue rising and possibly reach 200p in the near term. Since then, the stock has pulled back quite a bit due to the ongoing fear in the financial market. It has moved slightly below the important support level at 150p, which was the highest level on November 9 2021. It is still being supported by the 50-day and 200-day moving averages, meaning that bulls are still in control.
Therefore, I believe that the ongoing fear in the market is unwarranted, which could see the stock resume the bullish trend in the coming weeks. This view will be confirmed if the stock manages to move above 160p.