Surely at some point the Rolls-Royce (LSE: RR) share price has to stop. After its latest update, I’m not so sure. Is there more to come from the FTSE 100’s highest-flying stock?
On Friday (30 April), the engineering group wowed investors again with a strong set of Q1 results. Its Civil Aerospace, Power Systems and Defence divisions all picked up where they left off in 2025. How does Rolls-Royce keep doing it, especially as war in Iran rattles markets?
The Civil Aerospace division generates most of its revenues from aircraft engine maintenance contracts, which are based on miles flown. With hubs such as Dubai, Doha and Tel Aviv disrupted, I expected a hit here. So far, Rolls-Royce has shrugged that off.
How long can this stock carry on climbing?
Power Systems revenues rose again, driven by AI data centre generation. Defence is a good place to be right now. Interestingly though, pureplay defence stocks such as BAE Systems and Babcock International Group both dropped over the past month, possibly after becoming overstretched and triggering profit-taking. That’s less of an issue for Rolls-Royce, thanks to its three-way diversification.
Its shares climbed a modest 5% over the month. They’re now up 53% over one year, and an extraordinary 1,023% over five. That’s impressive, but no stock rises forever. Not even this one.
But I’ve been digging through broker forecasts, and was stunned. They’re way more optimistic than I expected.
In total, 18 analysts supply one-year price targets, producing a consensus of 1,428p. If correct, that implies a gain of more than 18% from today’s 1,206p. I think that’s impressive, given its barnstorming run. If correct, it would lift its market cap towards £120bn. One broker even forecat the shares could hit 1,740p, a 44% gain.
It’s also worth noting that 15 out of 20 brokers rate Rolls-Royce a Strong Buy, with two more calling it a Buy. Not a single one of them says Sell.
Dare investors buy at this price?
Of course, there are risks. High expectations are a threat in themselves. If Rolls-Royce disappoints at some point, the backlash could be severe. Management has big ambitions, including small modular nuclear reactors, or mini-nukes. That brings execution risk. There are also technical issues with some newer aircraft engines. Middle East airspace may be opening, but jet fuel shortages over the summer would hurt. Data centres are a major opportunity, but they’re expensive and take up a lot of land. Nobody wants a super-sized AI box dumped in their back yard.
Also, Rolls-Royce shares look expensive, trading on a price-to-earnings ratio of around 40. However, it was a lot higher just a month or two ago, when the P/E touched 65. That’s when I decided things had gone too far. I don’t think that today. The group has launched a three-year share buyback worth £7bn to £9bn, dividends are edging higher, and full-year 2026 guidance has been reaffirmed.
This is a brilliant company, and I’m happy to hold it in my portfolio. Common sense says that growth will inevitably slow from here. But I still think it’s worth considering today. Even more so if the market dips in the days ahead.
