The Rolls-Royce (LSE: RR) share price simply received’t cease. The FTSE 100 aerospace inventory has rocketed 772% in simply three years. Over the previous yr, it’s soared 102%. 

Many buyers assumed it will run out of puff. Some held again from shopping for. Others took earnings too quickly. Both means, they’ll be kicking themselves, as Rolls-Royce has risen one other 35% to date in 2025.

In fact, my headline is rhetorical – no share price climbs ceaselessly. However as soon as momentum units in, a inventory can soar for for much longer than appears possible. The massive query is: does Rolls-Royce nonetheless have gasoline within the tank, or is a correction on the way in which?

Primary FTSE 100 flyer

2025 has introduced loads of excellent news. In January, Rolls-Royce landed the largest Ministry of Defence contract in its historical past, a £9bn deal for nuclear submarine engines.

February outcomes confirmed 2024 working earnings jumped 49% to £2.9bn, whereas the group hiked mid-term targets, reinstated its dividend, and introduced a £1bn share buyback for good measure.

Civil aviation stays an enormous revenue driver, with Rolls-Royce engines in excessive demand as long-haul air journey continues to get better post-pandemic. Now defence is getting in on the act. The shares spiked once more earlier this month, as European nations ramp up army spending to discourage Vladimir Putin.

Rolls-Royce’s transfer into small modular nuclear reactors (SMRs) might additional drive development. These so-called ‘mini nukes’ are nonetheless in improvement, but when they take off, Rolls-Royce has an enormous alternative.

Regardless of all that optimism, there are many dangers. With a price-to-earnings ratio of 40, it trades at a large premium in comparison with the FTSE 100 common of 15. That’s justified if earnings hold climbing, but when development stumbles at any level, the share price might take an enormous hit.

There’s additionally the chance that European nations might cool on shopping for US defence gear attributable to Trump’s perceived unreliability as an ally. Whereas that would profit Rolls-Royce in Europe, it might additionally damage its US defence commerce if America retaliates. 

Development, dividends, and a buyback

And what about Trump’s commerce conflict? If tariffs improve, Rolls-Royce’s engines and energy methods might grow to be costlier for American consumers, denting gross sales.

If the US falls into recession, long-haul air journey could gradual. That’s a fear as a result of Rolls-Royce’s engine upkeep contracts are based mostly on miles flown.

If these mini-nukes fail to reside up to expectations or get a thumbs down from governments, dissatisfied buyers might begin bailing out.

The 16 analysts protecting Rolls-Royce have produced a median one-year goal of 780p. If right, that implies a small drop of round 2% from as we speak.

Forecasts are slippery issues, however it’s simple to see the inventory slowing from right here. Then once more, I’ve been saying that for the final 18 months.

I ultimately stopped worrying and joined within the enjoyable, shopping for Rolls-Royce shares on 6 August for 455p throughout a short summer season dip. At as we speak’s price of 795p, I’m up round 75%. However sooner or later, somebody will get burned. I’ve received a pleasant security web now. New consumers received’t have that.

Rolls-Royce is now a £66bn firm. It’s loads greater than it was, however may very well be greater nonetheless. I feel it nonetheless has luggage of potential and long-sighted buyers ought to nonetheless take into account shopping for it, particularly on a dip.