BAE Systems share price silently soars to ATH, flips key resistance

January 03, 2024 10:02 PM PST | By Invezz

BAE Systems share price silently soars to ATH, flips key resistance — Image source: Invezz

Unprecedented demand

BAE Systems, the giant British defence contractor, has had a strong performance in the past few months. The company, which is the 7th biggest industry, is seeing unprecedented demand as geopolitical tensions rise.

The most recent financial results showed that the company’s sales jumped to over £12 billion in the first half of the year. This was a strong revenue growth since it made £10.5 billion in the same period in 2022.

Most importantly, BAE Systems’ free cash flow also continued soaring, hitting £1.08 billion in the first half the year. It stood at £123 million in the same period a year. Another important aspect is that its order backlog surged to over £66.2 billion from the previous £55.2 billion.

BAE Systems will likely continue seeing strong demand as geopolitical concerns rise. In Indo-Pacific, Xi Jinping has pledged to reunify Taiwan, which will likely happen using force. A crisis is brewing in the Middle East while the war in Ukraine is going on.

It is against this backdrop that the company is working to restart the manufacturing of the popular M777 howitzer shell, which has been highly successful in Ukraine. This is a highly lucrative business for BAE Systems because a single howitzer costs over $5 million.

BAE Systems is also benefiting from the AUKUS deal between Australia, United States, and the UK. In this case, the company will take part in manufacturing Australia’s nuclear submarine. It also recently won a $4.8 billion UK submarine deal.

Still, BAE faces some key risks going forward. The biggest risk is that the company is operating at capacity, making acceleration a bit difficult. Unlike other companies, BAE Systems needs to vet its staff well before hiring them. There is also a skill mismatch challenge.

Also, there are concerns about costs now that the price of steel and aluminum is soaring. Data shows that iron ore prices, a key component of steel manufacturing, has soared to a two-year high. Aluminum sits at its highest point since August.

BAE Systems share price forecast

BA chart by TradingView

Turning to the daily chart, we see that the BA share price has been in a strong uptrend in the past few months. As it jumped, the stock crossed the key resistance point at 1,130p, the highest point on November 2nd. By so doing, the shares have invalidated the double-top pattern, which is a popular bearish sign.

BAE Systems stock price has remained above the 50-day and 100-day Exponential Moving Averages (EMA). At the same time, the Relative Strength Index (RSI) has moved above the overbought level. The MACD has jumped above the neutral point. Therefore, the outlook for the stock is bullish, with the key resistance being at 1,200p.

The post BAE Systems share price silently soars to ATH, flips key resistance appeared first on Invezz

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