Rolls-Royce (LSE:RR.) shares have been a stellar investment over the last few years. The engineering giant essentially doubled its market-cap in 2024, then doubled it again in 2025. And so far, it seems this momentum’s continuing into 2026.
Since the start of the year, investors have already earned a 4.5% gain. That may not sound like much, but remember that’s just over half what the UK stock market typically generates in a whole year. And for anyone who put £5,000 to work, that translates into a profit of £225 without having to do any work.
It’s also roughly how both 2024 and 2025 kicked off. So is this a precursor to yet another doubling event for Rolls-Royce shares? And is now the right time to consider buying more?
Latest forecasts
It goes without saying that just because Rolls-Royce shares have delivered similar early performance in previous years doesn’t guarantee the stock will double once again in 2026. And at a £105bn market-cap, doubling the size of the business in 2026 will likely be quite a challenging feat.
Having said that, there remains a compelling bull case. So much so that the analysts at both Deutsche Bank and UBS still have some fairly aggressive share price targets at 1,550p and 1,625p respectively.
Compared to where the stock’s trading today, that translates into a potential gain of up to 33% — enough to transform £5,000 into £6,650.
The new bull case
Digging into these latest expert projections, the bull case surrounding Rolls-Royce in 2026 has changed compared to previous years.
Previously, the focus was primarily on the company delivering a strong turnaround under new leadership after years of mismanagement. Today, experts are betting on a new ‘supercycle’ within the aerospace and defence sector.
As global fleets age, demand for Rolls-Royce’s leading aftermarket services increases, opening the door to higher pricing power. The same is true for the defence sector. European nations are now drastically ramping up their defence spending budgets, creating new opportunities for Rolls-Royce to capitalise on.
A perfect example of this is last year’s £9bn contract with the UK Ministry of Defence for submarine nuclear reactors, spanning eight years and providing long-term revenue visibility.
What could go wrong?
For the most part, Rolls-Royce’s civil aerospace arm is heavily dependent on aircraft designed for long-haul flights. A lot of this sort of travel activity is concentrated in Asia, specifically China.
Any prolonged economic wobble or downturn in travel demand from this region of the world could have an outsized impact on the business. And depending on the severity of this potential slowdown, the company could end up missing its free cash flow and earnings targets that today’s valuation has seemingly already priced in.
In other words, should the macroeconomic landscape shift unfavourably, Rolls-Royce shares could actually take a nasty tumble rather than continuing to rise.
So where does that leave investors? Underestimating this business over the last few years has been a costly mistake. But at a forward price-to-earnings ratio of 39.7, Rolls-Royce shares seem to be priced for perfection. That leaves little margin for error if internal or external disruptions comes along.
With that in mind, I think there are more promising opportunities to explore elsewhere. Luckily for UK investors, they’re spoilt for choice.
