The Rolls-Royce share price has been one of the top-performers in the FTSE 100 in the past few years. It soared to a record high of $650 this month, bringing the gains from 2021 to 1,702%. In contrast, the FTSE index has jumped by over 76% from the same period.
Rolls-Royce stock has soared as investors cheered the actions of Tufan Erginbilgiç, the CEO who joined in 2023. It also soared alongside other industrial stocks like General Electric and Illionois Tool Works. Here are the top three reasons why the Rolls-Royce stock price may still soar in 2025.
Rolls-Royce share price has strong technicals
The first main reason why the Rolls-Royce stock price may keep rising is that it has strong technicals. The weekly chart shows that it has jumped from 65.75p in 2022 to a high of 650p.
It has formed an ascending channel in the past few years. The stock remains above all moving averages, a sign that investors are still bullish on the stock. In technical analysis, it is argued that an asset will remain in an uptrend as long as it is above the moving averages.
The Rolls-Royce stock price has also remained above the Ichimoku cloud indicator. It has also continued to form a series of higher highs and higher lows. Therefore, a strong surge above the all-time high will be a confirmation that the uptrend is continuing. That will lead to more gains, potentially to the next psychological level of 700p.
However, there are a few risks to the bullish view. For one, there are signs that the stock is forming a bearish divergence pattern as the Relative Strength Index (RSI) and the percentage price oscillator have retreated. Therefore, while the general view for the stock is bullish, there is a risk that it will pull back, even to the psychological level of 500p.
RR chart by TradingView
Read more: Why has the Rolls-Royce share price jumped, and what is next?
Civil aviation sector is booming
The other reason why the Rolls-Royce share price may keep soaring this year is that the civil aviation industry is booming. IATA, an organization for airlines, estimates that revenue and profits for the biggest airlines will continue soaring this year.
Passenger numbers will soar, pushing the total revenue to over $1 trillion. This is an important sector for Rolls-Royce Holdings because it accounts for over 50% of its business. It makes money by both selling aircraft engines and entering long-term service contracts.
In most cases, the Rolls-Royce share price does well when the civil aviation sector is booming. A good example is what has happened in the past few years.
Rolls-Royce to hit its mid-term targets
Further, the Rolls-Royce share price will do well as the company has set ambitious targets that it is expected to meet. It expects to boost its operating profit from between £2.5 billion and £2.8 billion in the medium term.
The company is also hoping that the operating margin will move to between 13% and 15%, leading to a free cash flow of between £2.5 billion and £3.1 billion.There are signs that it will get to these targets ahead of schedule.
Rolls-Royce Holdings hinted that its operating profit for 2024 will be between £2.1 billion and £2.3 billion. It also hinted that the FCF will be btwen £2.1 billion and £2.2 billion. These numbers mean that the operating profit target will be reached this year and the cash flow one in 2027.
There are other reasons why the Rolls-Royce stock price will keep rising. For example, Boeing has remained out of headlines meaning that the management is improving its business. There is also hope the company will handle the supply chain issues well and benefit from the power demand because of AI data centers.
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