As a shareholder in Rolls-Royce (LSE: RR), 2022 so far has not been a banner year. Rolls-Royce shares have fallen 29% since the start of the year.
Lately though, things have been looking up. The shares have moved up 14% this month. If they do the same again from the current price, the Rolls-Royce share price will break through the £1 level.
Might that happen in coming weeks?
Positive momentum
I do not see it as mere good luck that has pushed the shares up this month.
Rolls-Royce looks like a business in recovery mode. Airlines such as easyJet have lately reported surging demand. That could boost servicing revenues at Rolls-Royce as planes fly for more hours each month. It could also mean some airlines start eyeing expansion plans more aggressively. That could lead to new engine purchases.
On top of that, Rolls-Royce is making moves that bode well for financial performance. In a trading statement this month, it said that it still expects to meet its financial goals for the year despite the cost of stockpiling some inventory to beat logistics challenges. It also reported a record order intake in its power systems division, as well as the repayment of a £2bn loan.
Overall, the business is getting on a stronger financial footing than in recent years. That has been reflected in the rising price of the shares.
Improving outlook
But while such positive momentum has helped push the price up this month, can it continue?
I think it can. Rolls-Royce has a clearly defined plan and seems to be executing it well. It can benefit from positive business trends at customers such as airlines. As investors gain more confidence in the sustainability of aviation demand recovery, I think we could see further gains in the Rolls-Royce share price.
It could reach £1 by moving up 12% from its current level, a smaller gain than we have seen in November. One trigger for such a move could be the announcement of a big contract win, something that could come at any time.
Another could be the publication of full-year results in February, especially if they are accompanied by an upbeat trading statement.
As a long-term investor and existing shareholder, I would be happy with the shares moving up in December, February or indeed at any point. I think they could reach £1 again in coming months, but currently see no specific trigger for that to happen in December, aside from any broad market rally. The recent increase already reflects a positive response to this month’s trading statement, in my view.
I’ll hold my Rolls-Royce shares
Longer term, I continue to like the firm’s strong position in an industry with few competitors and high barriers to entry. But risks remain, from spiralling costs hurting profitability to a further downturn in aviation demand.
Overall, I continue to see value here. But as I already own quite a few Rolls-Royce shares, I do not plan to add any more to my portfolio right now. I will hang onto those I already own though, rather than selling after the recent price rise.
