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Over the past few weeks, various banks and brokers have been busy updating their target share prices for Rolls-Royce (LSE:RR). This coincides with us approaching the end of the year and with a period when the share price has been under increasing pressure. Down 5% in the last month, here’s what the experts are thinking right now.
Maintaining a positive view
Over the past month, various analysts have shared updated views on the company. For example, earlier this week, analysts at JP Morgan said not to panic at the recent wobble. Instead, they put out a target price of 1,320p for the coming year. For reference, the current share price is 1,100p. They feel the company still has strong fundamental value and expect to see stronger performance in areas such as the civil engine aftermarket.
Among other notable banks, Morgan Stanley is targeting 1,280p, while Citi is targeting 1,101p. The average price now (having factored in the recent updates) of all the combined views is 1,242p. Clearly, there’s consensus that the stock hasn’t peaked and still has room to rally in 2026.
Backed up by financials
The trading update from last month can justify the outlook. Across the board, there were positive initiatives going on. For example, in Civil Aerospace, the update said “demand remains strong with significant large engine orders.” In the exciting Small Modular Reactor (SMR) space, it’s making progress in Sweden, the UK and the US to secure lucrative contracts. I think this is an area that could offer significant long-term growth.
With this momentum rolling over into 2026, I think there’s plenty to be optimistic about. Importantly, the management team is continuing to progress on the transformation programme. This means that there will likely be further scope for cost-cutting and improving efficiency next year. This, combined with higher demand, could translate to higher profitability, helping to lift the share price.
Tempering optimism
Despite this positive outlook, there are risks involved. The stock has been on a crazy rally over the past year, jumping almost 100%. Over two years, it’s up 282%. With a price-to-earnings ratio of 54.51, it’s now an expensive stock to consider. It’s almost three times as expensive as the average stock in the FTSE 100! So the concern here is that any future gains might not be that high due to its valuation.
Another concern is any reemergence of supply chain bottlenecks, especially for specialist aerospace parts. The company has struggled with this in the past, and it would be a real pain to have this in 2026 as it would raise costs, delay deliveries, and squeeze margins.
Even with these concerns, I agree with the consensus view from top analysts and therefore feel it’s a stock worthy of consideration for investors in 2026.
