Can Supersonic Planes Save the Ailing Rolls Royce Share Price?

Rolls Royce share price is up slightly today as investors react to news that the firm is investing in the hypersonic and supersonic industries. The shares are up by 0.70% and are trading at 258p, which is higher than this week’s low of 213p. The stock has risen even as the FTSE 100 index drops by more than 0.15%.

In a statement yesterday, Rolls Royce Holdings said that it had invested £20 million in Reaction Engines, a company that is based in Oxfordshire. The company had invested in the company back in 2018. The company wants to use Reaction’s technology to help it in its aerospace gas turbines industry. It is also exploring its future in the hybrid-electric propulsion systems.

The announcement came a few weeks after we reported that Rolls Royce had signed a memorandum of understanding with Richard Branson’s Virgin Galactic Group. In the agreement, the two companies agreed to work on supersonic aircrafts. A representative at Virgin said:

“We are excited to complete the Mission Concept Review and unveil this initial design concept of a high speed aircraft.”

The announcement by Rolls Royce comes at a vital time. For one, Rolls Royce share price has dropped by more than 65% in the past 12 months. It has also dropped by more than 65% in the past five years and is trading at the lowest level in years. The firm has also been downgraded to junk status by the main rating agencies like Fitch and Moody’s.

It also comes at a time when many airlines – who will be buyers of the supersonic aircrafts – are struggling. Several airlines have filed for bankruptcy while most others have received government bailout money.

Most importantly, there are questions about whether supersonic and hypersonic aircrafts will be profitable. As you recall, airlines retired Concord, when it became unprofitable. So, is Rolls Royce share price a buy because of these investments?

Rolls Royce share price forecast

Rolls Royce stock is trading at 260p. On the daily chart, the price is below the 50-day and 100-day moving averages. The price is also forming a descending triangle pattern, that is shown in black. Such a triangle pattern is usually bearish, as you can see in our free trading course.

Therefore, I suspect that the shares will continue being under pressure in the near term. On the other hand, a move above 282p will invalidate this trend. This price is along the 50-day exponential moving average and the highest level on August 11.

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Rolls Royce Share Price Chart

Rolls Royce Share Price

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