3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next 10 years.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Rolls-Royce Holdings plc

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Rolls-Royce (LSE:RR) share price has been one of the FTSE 100’s biggest successes of the last 12 months. But I think it might not be done yet. 

Created with Highcharts 11.4.3Rolls-Royce Plc PriceZoom1M3M6MYTD1Y5Y10YALL5 Nov 20195 Nov 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

In a recent interview with Nicolai Tangen, CEO Tufan Erginbilgiç outlined three lines of opportunity for the company. And if earnings keep growing, I expect the stock to move higher.

Should you invest £1,000 in Auto Trader Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Auto Trader Group Plc made the list?

See the 6 stocks

Sustainable fuel

According to Erginbilgiç, the aviation industry is heading in the direction of sustainability. More specifically, the next 20 years is going to involve a shift to sustainable aviation fuel (SAF). 

If this happens, Rolls-Royce is in a strong position. Unlike its competitors, all of the company’s engines are currently 100% SAF compatible.

One issue is that SAF is between two and seven times more expensive than jet fuel. This makes airlines reluctant to use it unless they’re either incentivised to do so, or forced by regulation. 

Rolls-Royce therefore needs institutional support to drive this growth opportunity. But a focus on global emissions targets means this might well be a realistic possibility.

Narrow-body aircraft

Another key avenue involves expanding the market Rolls-Royce sells its engines into. The firm has been focused exclusively on wide-body aircraft since 2011. 

Erginbilgiç, however, sees the growing narrow-body market as a potential opportunity. The company’s plan is to participate via a partnership with a manufacturer such as Airbus

Rolls-Royce believes its UltraFan technology can improve engine efficiency by between 10% and 15%. And this could translate into an important opportunity for growth. 

A partnership means relying on another company though. With Boeing dealing with quality issues and Airbus struggling to expand production, this could be a risk with this strategy.

Small nuclear reactors

Nuclear power looks increasingly like an important source of energy, especially in Europe. If this turns out to be the case, Rolls-Royce is in a strong position to benefit from this. 

Small modular reactors – which are more flexible and cheaper than their larger counterparts – may well be important. And the company is a leader in this area.

The technology isn’t new, but commercialising it involves an approval process in three phases. Right now, Rolls-Royce is the only firm to have reached the second phase. 

Building out the supply chain here will take time. But with net zero targets and energy security to consider, this could be an important source of growth over the next 10 years.

Is it too late to buy the shares?

With the Rolls-Royce share price having climbed 263% in the last 18 months, it’s natural for investors to wonder whether the time to buy the stock has passed.

Obviously, it’s better to buy any stock at £1.51 than at £5.48, but the Rolls-Royce CEO still sees plenty of opportunities ahead. And if the company keeps growing, I expect the stock to follow so it may be worth considering.

Should you invest £1,000 in Auto Trader Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Auto Trader Group Plc made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Prediction: 12 months from now, £5,000 invested in Tesla stock could be worth…

Tesla stock has endured a miserable year so far, falling by 29%. Muhammad Cheema takes a look at how it…

Read more »

Investing Articles

See what £10,000 invested in Tesla shares at their mid-December peak is worth today 

As the world absorbs the full scale of Donald Trump's tariffs, Tesla shares are reeling. Investors who bought the stock…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »