Rolls-Royce Group Share Price Forecast January 2022 – Time to Buy RR?

Shares of British multinational aerospace and defence company Rolls-Royce Group (LSE: RR) are in the red today, after closing at £122.88. Rolls-Royce Group is back on track after two years of disruption.  The company has provided several positive updates that have improved investor sentiment towards it. These updates include the funding of Rolls’ new nuclear power plant business, the recovering aviation market, and the sales of business divisions to raise cash.

Rolls-Royce Group – Technical Analysis

Rolls-Royce Group’s financial statement indicates that the market cap is at £10.282 billion with total assets worth £28.755 billion. Revenue for 2020 was £11.82 billion with a profit margin of -26.81% compared to £16.59 billion in 2019.

Moving averages for Rolls-Royce Group such as Exponential Moving Average (10)(120.46), Simple Moving Average (10)(118.14), Exponential Moving Average (20)(121.85),  Simple Moving Average (20)(120.80) are indicate a buy action. On the other hand, oscillators such as Relative Strength Index (14)(49.20), Stochastic %K (14, 3, 3)(70.53), Commodity Channel Index (20)(28.71), Average Directional Index (14)(33.01) and Awesome Oscillator(−4.64) are neutral.

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Recent Developments

Rolls-Royce is known for manufacturing engines for commercial and military aircraft, and designs and constructs power systems. It got negatively impacted by the pandemic in March 2020. RR shares had touched new lows, reaching 64.8p in November 2020 despite intermittent rebounds. As the company is paid based on flying hour contracts by airlines using Rolls-Royce engines, the shares faced an existential threat when most aircraft were grounded.

To mitigate the inevitable and significant 2020 loss, management cut 7,000 roles from the workforce and began selling subsidiaries, including Bergen Engines, ITP Aero and Air Tanker Holdings. The company also sold its civil nuclear business segment which contributed towards a £2 billion target in 2021. As a result of reduced flying hours globally, Rolls-Royce recorded a £1.6 billion loss for 2020. Many investors sold the shares due to these reasons.

RR shares lingered around the 100p mark and occasionally broke 10% either side during the first half of 2021. The shares increased in value on a general feeling that the pandemic was coming under greater control and international travel was returning to pre-pandemic norms. However, with the emergence of the Omicron variant, the share price retraced nearly 100% of these recent gains.

In September 2021, Rolls-Royce got a contract from the United States Air Force to provide the B-52 engine replacement programme, an important decision that will last for the next thirty years. In terms of nuclear power, the company has constructed several small modular reactors to produce energy on a very low carbon basis which will enable a smooth transition over the long term from fossil to renewable fuels.

Should You Buy RR Shares?

Before investors get excited about the positive news, Rolls-Royce will have to navigate many challenges before it can get up to 300p. These include the general disruption caused by the pandemic and increasing competition. Analysts agree that it could be the middle of the decade before the aviation industry has completely moved on.

Nevertheless, Rolls Royce has a big chance to return to its pre-pandemic high of 300p or more as it starts to rebuild and diversify.  This is one of the main reasons to buy the shares right now and hold for the next year. In spite of facing tremendous challenges ahead, the odds are in the company’s favour making this a company to buy and hold in 2022.

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