Rolls Royce Stock: Is A Reversal In the Works? - InvestingCube

Over the past few years, Rolls-Royce Holdings plc (LON: RR.) has been one of the best companies in the FTSE 100, thanks to a stunning recovery under CEO Tufan Erginbilgiç. However, the stock’s path has been a on a downtrend in October. Rolls Royce stock price started the month strong, with shares trading above 1150p, but then it started to drop and closed at around 1,103p on October 17.

However, in a potential shift, the price of Rolls Royce shares went up in the last trading session on October 20, closing at 1,127p, according to London Stock Exchange data. As of this writing, it was still at 1,126p. That was a small rebound, but it was enough to make investors wonder if the trend could change. For a company with such a solid foundation, it is easy to see why some might be wondering if this is the beginning of an uptrend.

The drop in Rolls Royce stock is largely a reflection of a broader market concern. According to Financial Times, some of the most significant issues are problems with the supply chain in the aerospace industry. In addition, there are macroeconomic headwinds like tighter household finances that could make people less likely to fly.

In general, Rolls-Royce’s fundamentals are still strong, and that supports the case for a reversal. That is mostly because the company’s performance for the first half of 2025 was quite impressive. The company’s profits and cash flow were far better than they were a year earlier, and it also went from being in debt to having net cash.

The civil aerospace segment, which makes up a substantial part of the company’s income, has benefitted much from the rise in air traffic. In addition, the defense and power systems segments add diversification. Furthermore, recent wins, such as the UK submarine contract and new contracts for aircraft engines, indicate expansion in the aviation and military industries. Despite the promising outlook, investors need to be cautious.

At its current level, Rolls Royce appears to be selling at a premium, due to its forward P/E of 53.1 and price-to-book ratio of 40.3. These high figures leave little room for errors.  Moreover, some analysts say the stock’s 90% gains this year could be out of touch with reality. That has already led to concerns about a potential bubble. The most recent session’s increase is a good sign and could be the start of a change. However, it’s not a clear technical breach with confirmation from everyone yet.

Rolls Royce stock price technicals send mixed signals. The recent daily gains are good, but that’s not enough to prove that the trend is shifting. In most cases, a real short-term reversal would need many days of upward movement. The ideal outcome would be to break over a critical resistance level and set a new low that is higher than the previous one.

As seen on the chart below, some technical indicators show a good short-term outlook based on the most recent data. For the medium to long term, it’s a strong positive sign that the stock is still above its key 50-day and 200-day moving averages. This means that the stock’s overall trend is still going up, and the current dip could be a good time to buy while the price is still going up.

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