BAE Systems Share Price Forecast August 2021 – Time to Buy BA?

Shares of British multinational security and aerospace company BAE Systems(LSE: BA) are in the red today after it closed at £569.4 on August 9^th at 19:21 UTC+1. The company recently secured a new contract worth £135 to develop Typhoon fighter jet weapons systems.

BAE Systems – Technical Analysis

The financial statement released by BAE Systems indicates that its market cap is £18.497 billion with total assets worth £27.209 billion. Revenue for 2020 was at £19.28 billion with a profit margin of 6.74%, up from 2019’s revenue of £18.30 billion.

Oscillators for BAE Systems such as Stochastic RSI Fast (3, 3, 14, 14)(54.4), Williams Percent Range (14)(−38.3) and Bull Bear Power(11.3) and Ultimate Oscillator (7, 14, 28)(41.5) are all neutral. Moving averages for BAE Systems such as Exponential Moving Average (100)(530.2), Simple Moving Average (100)(526.0), Exponential Moving Average (200)(519.2) and Simple Moving Average (200)(505) are pointing towards a buy action.

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Recent Developments

BAE Systems has been busy lately as evident from a string of business activities it has been engaged in recently. As mentioned before, the company secured a new contract worth £135 million for developing Typhoon fighter jet weapons systems. This will pave the way for supporting almost 100 high skilled jobs in the United Kingdom’s Northwest region.

In a recent business update, the company revealed that its programmes to manufacture fighter jets, submarines and other related equipment were all running smoothly. It also raised its dividend, lifted annual guidance and began a new share buyback plan. With customers based out of the United States, Saudi Arabia and Britain, BAE hiked its dividend to 9.9pence and will start the share buyback program worth £500 over the subsequent 12 months.

According to the company management, its unit supplying commercial aviation and its cybersecurity business started to improve in 2020. Its confidence is boosted by the reported progress on its projects. These include reaching a full output of F-35 near fuselages, automation improvements in the production of combat vehicles and the delivery of electronic warfare systems for the F-35. The company’s earnings per share rose by 25%, as a result, to reach 21.9 pence in the first half to June 30^th.

Should You Buy BA Shares?

Investors have many reasons to pick up BA shares at the moment. It is undoubtedly an industry leader, recording £10.6 billion worth of orders in the first six months of 2021, up from £9.3 billion the same period a year earlier. These figures underline the company’s broad product ranges and strong relationships with its customers. The recent news of the £500 million share buyback, as well as an increase in the interim dividend, can be positive drivers for BAE’s share price. The company is in full recovery mode as it generated a free cash flow of £461 million in the first half, compared to just £100 million in the same period last year.

While there are concerns about national governments decreasing their defence spending due to the economic consequences of COVID-19, demand for BAE Systems’ products is expected to remain high in the short-to-medium term.  As the West remains guarded over Chinese and Russian foreign policy, this demand is not expected to die down anytime soon.

However, investors also have to consider a few risks. BAE’s commercial aerospace operations took quite a hit because of the COVID-19 pandemic and related travel restrictions. The rising popularity of responsible investing also poses a threat to BAE’s long-term share price prospects. Many investors who believe that shares of companies such as these help to keep the UK safe, will obviously pick up these shares. However, many socially and environmentally aware investors would likely stay away from the shares.

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