Citi and Morgan Stanley Lift Rolls-Royce Targets as Power Systems Demand Surges

Rolls-Royce Holdings (LON: RR.) shares drew fresh attention on Monday after Citigroup and Morgan Stanley both raised their price targets on the FTSE 100 engineering giant, underscoring growing analyst confidence in the group’s diversified turnaround story.

Citi delivered the more dramatic move, lifting its target by nearly 50% to 1,647p from 1,101p, while maintaining a “Neutral” rating. The upgrade followed materially stronger first-half results, with Citi raising its longer-term profit and cash flow forecasts by 30-40% across the business.

Notably, the broker’s sensitivity analysis now identifies Power Systems — boosted by surging data centre demand — as the single largest contributor to its valuation, overtaking Civil Aerospace for the first time. Citi assigned 504p per share to Power Systems versus 353p for Civil Aerospace, forecasting a long-term margin of 23.5% for the division, well above management’s own 18-20% medium-term guidance.

Morgan Stanley also lifted its target on the shares Monday, joining a broader wave of bullish sector revisions that has seen brokers including JPMorgan (1,800p, Overweight) and Jefferies (1,870p, Buy) turn increasingly constructive on the stock.

Rolls-Royce shares opened at 1,541p Monday, later trading near 1,563p, up around 1.4% on the day. The stock — up nearly 34% year-to-date — carries a market capitalisation of roughly £132 billion, with a consensus “Moderate Buy” rating and an average target near 1,612p across covering analysts.