2024’s been a spectacular year for the Rolls-Royce (LSE:RR.) share price. The engineering giant saw its market capitalisation explode as a new management team rights the ship and returned the business to profitability. And so far, the stock’s surged more than 80% since the start of the year.
But with so much growth already under its belt, investors are starting to wonder whether there’s still room for further upside. So let’s take a look at what the expert analysts have to say on the subject and whether I should be considering this business for my portfolio.
Rolls-Royce share price to hit 675p?
As of October, there are 18 institutional analysts following Rolls-Royce. For the most part, it seems that the overall sentiment’s quite positive, with 13 opinions sitting in either the Outperform or Buy categories.
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| Opinion | Analysts |
| Buy | 3 |
| Outperform | 10 |
| Hold | 4 |
| Sell | 1 |
| Strong Sell | 0 |
Yet, despite the largely positive sentiment from financial institutions, the Rolls-Royce share price forecasts are where things start to look less promising.
It’s true that one analyst has predicted the stock could rise as high as 675p by this time next year. Compared to the current share price, that suggests a potential upside of more than 20%. However, this is the most optimistic outlook for the business, with the most negative projection suggesting its share price could collapse by as much as 56%!
On average, it seems most analysts believe the stock is fairly valued at 552.50p, which is very close to its current trading level. In other words, Rolls-Royce seems to have its expected growth potential already baked into its valuation.
But what could happen next that would change that, either for better or worse?
What could go wrong… or right?
Let’s start with the negatives. A big catalyst behind Rolls-Royce’s comeback’s the rebounding travel market. Yet, looking at the latest results from airline companies, it seems that airfare pricing’s getting weaker.
One potential explanation here is the softening demand for travel as delayed holidays have started to take place. And since many of the group’s engine maintenance contracts are based on the number of hours flown, this slowing trend could have knock-on effects on Rolls-Royce’s revenue growth.
On a more positive note, the group’s mini-modular nuclear reactors remain on track to launch before the end of the decade. Given that the UK government’s begun expressing an interest in cost-effective nuclear energy options, the company looks primed to receive a lot of new orders, providing it can deliver on expectations. And since the UK’s not the only country exploring nuclear energy, Rolls-Royce could be set to reap enormous long-term returns on this project.
Time to buy?
As promising as Rolls-Royce’s long-term potential looks, the business is still currently dominated by its Civil Aerospace division. And right now, that’s the segment which is tackling a growing volume of uncertainty. Having already experienced a massive surge in valuation, I wouldn’t be surprised to see the Rolls-Royce share price take a hit if growth starts to slow. Therefore, I’m staying on the sidelines for now despite the optimistic outlook of analyst opinions.
