90p to 255p! Here are the top bank forecasts for Rolls-Royce shares

Jon Smith take a look at the reasons behind the current target prices for Rolls-Royce shares over the next year from major banks.

| 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.

Chalkboard representation of risk versus reward on a pair of scales

Image source: Getty Images

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.

At the moment, the Rolls-Royce (LSE:RR) share price is on a tear higher. Up 83% over the past year, the stock has hit highs of 160p. There’s a lot of debate as to whether the company has put the worst behind it, or if this is just a false dawn. Leading analysts at top banks have put out their price targets for Rolls-Royce shares, and there’s a lot to digest!

Misplaced optimism

Let’s start at the low end. JP Morgan, one of the largest banks in the world, has a price target of just 90p for the company. These targets (usually covering a period of 12 months) would reflect a 40% fall in the stock from current levels.

It flagged up various points of concern for investors to take note of. One element is regarding the reduction in debt levels. Following the sale of ITP Aero, it was able to reduce net debt from £5.1bn to £3.3bn as of the latest annual report.

Should you invest £1,000 in HSBC 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 HSBC made the list?

See the 6 stocks

Yet reducing debt organically from here is going to be hard. JP Morgan notes that it leaves the business exposed to cash flow shocks in coming years. This would be particularly evident if a lot of cash is being used to pay down debt.

Another point was made regarding the new CEO, Tufan Erginbilgic. Despite all the positive noises made around a fresh start and a new strategy, the bank flagged that this was the same chatter made with the previous two CEOs as well. As such, the share price could be inflated on hot air.

Reasons to be positive

At the other end of the scale, US-bank Citigroup has a share price forecast of 255p. This is 70% above the current price!

It explained that it expects widebody aircraft to continue to see client demand recovering. As such, the Civil Aerospace division could do well. This would be very interesting (if realised), because pre-pandemic, this division accounted for the majority of revenue at the company.

The analysts also disagree with JP Morgan regarding future cash flow. From the deep-dive research, they said they expect strong underlying cash flow improvements over the next five years. Cash flow is the crucial element to any business, so if this is correct, then the stock could rally as investors feel more comfortable with Rolls-Royce.

Differing views

Clearly, not everyone is going to have the same opinion on a stock. That’s why it’s key for each investor to note all the different research and come to their own conclusions before buying or selling.

The half-year results aren’t due out until August. Therefore, investors won’t have any new information to digest for a while. In the meantime, the stock will likely trade based on broader market sentiment and be linked to how the airline sector performs.

Created with Highcharts 11.4.3Rolls-Royce Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Should you buy HSBC shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

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.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 Growth Shares

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

2 shares to consider as a new US deal could revive the UK stock market

Our writer investigates two major FTSE 100 shares that could enjoy a boost following a US tariff shift and possible…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

This FTSE 250 growth trust just loaded up on these 2 top S&P 500 stocks

Our writer noticed that this FTSE 250 investment trust has just scooped up a couple of quality US growth stocks.…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

This world-class FTSE 100 company’s expecting up to 10% growth in 2025

This is one of the most profitable companies in the FTSE 100 index. And right now, it’s firing on all…

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
Investing Articles

£10,000 invested in Shell shares 10 years ago is now worth…

Shell shares have delivered a solid return over the past decade. But can the FTSE 100 share keep performing as…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Up 145%, this investment trust has a P/E ratio of 10. Is it still a bargain?

The long-term track record of this investment trust has been excellent. Our writer thinks it could still be a bargain…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

Up 850% in 3 years and the Rolls-Royce share price still won’t stop! See what the forecasts say now

Harvey Jones says Rolls-Royce shares continue to defy gravity. Yet this leaves investors facing a tricky decision over whether to…

Read more »

Artillery rocket system aimed to the sky and soldiers at sunset.
Investing Articles

Down 23% but with forecast annual earnings growth of 30%+ and new contracts just signed, should investors consider buying this FTSE 250 defence gem?

This FTSE 250 defence firm just signed two major new contracts, has excellent earnings growth prospects, and looks like a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

£11,000 invested in Lloyds shares a year ago is now worth…

Lloyds shares have significantly outperformed their FTSE 100 host index over the past year in price and yield gains. But…

Read more »