As we move closer to 2023, the future prospects of Rolls-Royce (LSE: RR) look promising. Despite the challenging market environment, there are several reasons why Rolls-Royce shares could surge in 2023. Here are three key reasons why.
- Recovery from the pandemic
The pandemic hit the aviation industry hard, leading to a significant reduction in air travel and subsequent demand for Rolls-Royce engines. However, with the global vaccination rollout, the aviation industry is expected to recover gradually, leading to an increase in demand for Rolls-Royce engines.
Rolls-Royce's recent financial results showed a 13% increase in civil aerospace revenue, indicating that the recovery has already started. The expected growth in air travel is likely to drive a surge in Rolls-Royce's stock price as demand for its engines increases.
- Strong order book
Despite the pandemic's impact on the aviation industry, Rolls-Royce has managed to maintain a strong order book. The company has a significant backlog of engine orders, which is expected to keep it busy for several years. This backlog is expected to contribute significantly to the company's revenue in the coming years, leading to a surge in the stock price.
Moreover, Rolls-Royce has secured several new contracts in recent months, indicating a strong future order book. For example, the company recently announced a contract to supply engines to the US Air Force, expected to generate significant revenue in the future.
Rolls-Royce has diversified its business model beyond aerospace engines, investing in power systems, and electric aircraft. The company's power systems business has shown strong growth, with revenue increasing by 15% in 2020.
Rolls-Royce's investment in electric aircraft is also expected to pay off in the future. The company is working on developing electric aircraft technology, with a target to have an all-electric aircraft in operation by 2026. This investment in electric aircraft technology is likely to generate significant revenue and lead to a surge in the stock price in 2023 and beyond.
The expected recovery in the aviation industry, a strong order book, and diversification of its business model are three key reasons why Rolls-Royce shares could surge in 2023. Investors should keep an eye on the company's progress in these areas to determine if it's worth investing in Rolls-Royce.