Rolls-Royce shares have slipped almost 19% from their early March high of 1,363p, recently changing hands for just above 1,100p. But the drop doesn’t appear to have fazed analysts, with one major broker team doubling down on previous targets.
On 25 March, Goldman Sachs reiterated its Buy rating and nudged its target price up to 1,400p, suggesting no fear of a drawn out correction.
So why is the investment bank still so upbeat after such a severe dip? Could Goldman see something the rest of us are missing? If so, the move could offer a chance to scoop up some cheap shares before recovery.
But before diving in, what are other analysts saying?
An optimistic outlook
Across the market, the mood is broadly positive. Consensus from 15 analysts sits at a Strong Buy rating, with an average 12‑month price target of 1,442p – roughly 30% above today’s level. This suggests many brokers also see further gains ahead — likely why investors view this pullback as nothing more than a short-term wobble.
Platforms such as AJ Bell report that DIY investors have been ‘buying the dip’ in travel names such as IAG and easyJet after recent volatility. If people expect long‑haul flying to remain strong, that’s indirectly good news for Rolls-Royce, which makes and services many of the engines that power those aircraft.
Looking closer
Under the cowling, the latest numbers help explain the bullishness. Rolls-Royce recently reported a 40.6% jump in underlying operating profit to about £3.46bn for 2025, comfortably ahead of earlier guidance. Management also upgraded its 2026 and 2028 profit and cash‑flow targets, signalling confidence that today’s strength is not just a one‑off.
Cash generation has been strong enough for the group to relaunch its dividend at 9.5p per share and announce a multi‑year share buyback programme running to 2028. In simple terms, that means more cash going back to shareholders, which often supports a higher share price over time.
Macro trends are working in its favour too. Long‑haul engine flying hours recently rose above pre‑pandemic levels, boosting high‑margin servicing income. Meanwhile, demand for its defence and power systems segments is being helped by higher military spending and data centre proliferation.
It’s easy to see why Goldman Sachs remains bullish on the shares and why they may still be worth considering.
Any reason to worry?
Naturally, no investment comes without risk. In this case, the main catch is valuation. Even after this dip, Rolls-Royce still trades on a punchy earnings multiple. In other words, the market expects a lot to go right. Any production issues, delayed engine deliveries, or earnings miss could see the price fall hard and stay down for a while.
And that’s not to mention rising oil prices, which could limit air travel and hurt engine sales.
Final thoughts
For long‑term investors, this 19% slide looks more like a bump in the road than the end of the story. The company is growing profits, returning more cash to shareholders, and benefiting from improving trends in travel, defence, and energy.
That said, investors who decide to buy are paying a premium price for a high‑quality turnaround, one that could be derailed if oil prices remain sky high.
As always, any decision should be made with diversification in mind to smooth out volatility – particularly in today’s highly uncertain market environment.
