It’s no secret that Rolls-Royce (LSE:RR.) shares have been on a rampage in recent years. An explosive turnaround by new leadership means anyone who bought shares towards the start of the recovery story is sitting on a 1,100%+ return. And this momentum continued in 2025 with the engineering giant doubling its market cap once again.
Of course, the question now becomes, will Rolls-Royce shares double again in 2026?
Here’s what the experts say
Even with substantial growth already under its belt, there continue to be lots of exciting developments for Rolls-Royce’s business.
The group’s operational turnaround is still ongoing, and management has already raised its profitability guidance for 2026. At the same time, demand for both its civil and defence aerospace products continues to climb, driving up the order book and boosting aftermarket services activity.
Pairing this with the ongoing successes orbiting its early-stage modular nuclear reactor technology, it’s not hard to understand why investors remain so bullish. And it certainly explains why, after such an impressive bull run, 14 out of 18 institutional analysts continue to rate Rolls-Royce shares as a Buy.
The most bullish among them is the team at Bank of America. Its analysts have projected that these factors combined will drive higher earnings throughout 2026 and 2027 while simultaneously stimulating even more free cash flow generation. And subsequently, they raised their share price target from 1,440p to 1,615p.
Compared to where Rolls-Royce shares trade as I write just after Christmas, that represents a potential 40.4% gain before dividends – enough to turn £5,000 into £7,022.
Marketing beating projection
Bank of America’s forecast means that it’s unlikely Rolls-Royce’s share price will double next year. And with a market cap that’s already sitting close to £97bn, that’s not a massive surprise. However, a near-40% gain is nothing to scoff at, beating the FTSE 100’s average annual return by five times!
So, is this a realistic expectation?
It’s important to note that most other analysts aren’t as optimistic. In fact, looking at the latest projections from Berenberg Bank, Citigroup, JP Morgan, and Deutsche Bank, it seems more analysts than not think Rolls-Royce shares will sit around 1,100p to 1,250p 12 months from now, despite these forecasts using similar growth catalysts.
That’s pretty close to where the stock trades now. And it suggests that the anticipated growth from higher defence spending and aftermarket service demand could already be baked into the share price.
Should customers start spending more, Rolls-Royce could indeed beat the average consensus. But sadly, the opposite is also true.
Suppose defence spending starts to slow, or weak economic conditions drag down total flight hours, reducing maintenance demand? In that case, Rolls-Royce could fall short of performance expectations and possibly trigger a sell-off as investors rush to lock in the profits of its impressive multi-year rally.
The bottom line
As a business, Rolls-Royce continues to impress me. But as a stock, I’m feeling more cautious. After all, the engineering giant is being valued at nearly 37 times forward earnings, opening the door to significant volatility should the increasingly lofty investor expectations fail to be met.
With that in mind, I think investors seeking a 100% return next year will need to consider looking elsewhere for under-the-radar opportunities. Fortunately, there are plenty of FTSE stocks that could have substantial turnaround potential.
