Will the Rolls-Royce share price wake up in the 2nd half of 2023?

UK stocks underperformed their international peers in the first half of the year. The FTSE 100 index rose by about 1.1% this year while the Nasdaq 100 and S&P 500 indices jumped by double digits. Rolls-Royce (LON: RR) was one of the top gainers in the FTSE index, having risen by over 60%. Recently, however, the shares have moved sideways as the past few months.

Turnaround in progress

Rolls-Royce Holdings has had a tough period in the past few years. In 2018, the company faced a major challenge when its Trent engine started developing cracks. The whole crisis led to substantial losses and loaded the company with more debt. 

Rolls-Royce then went through a major crisis in 2020 when the Covid-19 brought international travel to a halt. As a result, the company reported a 4 billion pound loss and increased its total debt to over 5 billion pounds. 

Rolls-Royce Holdings has now been working to rebuild its business. It announced thousands of layoffs, sold assets, and reduced its total debt load to over 3.3 billion pounds. Under its new CEO, the company is seeking to boost its profitability. 

This recovery has been helped by the ongoing recovery of the civil aviation business as most airlines boost their orders. In a recent statement, the company’s CEO announced that it was seeing robust demand for wide-body aircrafts such as Airbus A350 and Boeing 787. 

Most of this recovery is coming from China, a leading player in the aviation industry. As a result, engine flying hours has jumped to 83% of pre-Covid 19 levels. These hours are important since the company’s business model relies on engines that are in the air and after-market sales.

Still, the concern among analysts is that Rolls-Royce is not seeking to re-enter the narrow body industry, which is having a faster recovery than wide-body. Most of the recent orders were narrow-body planes. In a statement, the CEO said that the company would consider partnerships in the space.

Rolls-Royce share price forecast

RR chart by TradingView

The weekly chart shows that the RR stock price has moved sideways in the past few months. It is sitting at an important resistance level, which coincides with the highest level in November 2021.

The stock is also about to form a golden cross pattern, which is usually a bullish signal. It has also formed a bullish flag pattern and a cup and handle. Therefore, there is a likelihood that the shares will likely have a bullish breakout as buyers target the 50% retracement point at 210p, which is about 60% above the current level. This recovery will likely happen on or after August 3rd when the company publishes its financial results.