Rolls-Royce share price has moved in a tight range in the past few months and is hovering around its all-time high.
It was trading at 1,480p today, July 7, after rising by 52% in the last 12 months. This article highlights some of the key reasons why the stock may continue rising.
Rolls-Royce share price may benefit from the booming air travel industry
Rolls-Royce Holdings is a major player in the civil aviation industry, where it supplies some engines that power popular wide-body planes like Airbus A350, A330neo, and A380.
The company makes money in two ways: selling the engines and entering long-term service contracts. In some cases, the company is usually comfortable selling some of these engines at a loss in exchange for these contracts.
Its servicing contracts are charged on a Power by the Hour approach, with the contracts lasting between 8 and 15 years. As a result, in this model, the Engine Flying Hours (EFH) is usually one of the most important metrics.
Rolls-Royce Holdings will likely benefit as the travel industry returns to normal following the US-Iran war disruption. In its recent statement, the management noted that disruptions did not have a material impact on its operations.
Most importantly, the company is considering re-entering the booming narrow-body engine business.
It has already started this program and is talking to the UK government for funding. If it works out, its engines could go online either late 2029 or 2030.
Rolls-Royce is seeing strong data center demand
In addition to its civil aviation business, the company makes power generators that are mostly used in industrial sectors. One of its main use cases has been in the data center industry, which analysts expect to continue growing.
In a recent presentation, the company said that its data center backup power rose from 22GW in 2023 to 36GW in 2025. It now expects to grow this by 20% annually by 2030.
The power division’s revenue jumped to £4.9 billion last year from £3.3 billion in 2022, while its free cash flow soared to £700 million.
Rolls-Royce is a big player in the SMR industry
Another reason why Rolls-Royce shares will continue rising is its growing market share in the novel industry of small modular reactors (SMR).
These are small nuclear reactors that can be transported to a site and assembled. In most cases, these plants are able to generate between 10 and 300 megawatts of electricity.
Rolls-Royce is using its expertise in the nuclear space to build these products. Already, it has secured partnerships from the UK, Czech Republic, and Sweden.
If the initial deployments are successful, the company will be in a position to grow this substantially. Studies estimate that the SMR industry will grow to over $23 billion by 2035.
Defense spending is rising
Meanwhile, Rolls-Royce Holdings is benefiting from the ongoing defense spending in Europe and other countries.
Some European countries like Italy and France have committed to keep this spending growing in the coming years. President Donald Trump is expected to pressure the NATO members to accelerate spending this year.
Rolls-Royce has already won some contracts in the past few months. For example, it received an order to provide EJ200 engines that will power Turkey’s new fleet of 20 Eurofighter Typhoons. It has also won contracts from Australia.
Rolls-Royce stock has supportive technicals
RR stock chart | Source: TradingView
The daily chart shows that the RR stock has done well in the past few months. It jumped from a low of 1,093p in March this year to 1,485p today. It recently crossed the important resistance level of 1,420p, its highest point on February 26.
The stock is being supported by the 50-day moving average. As such, a clear break above the year-to-date high of 1,532p will point to more gains.
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