Barclays has become the latest broker to set a price target for Rolls-Royce Holdings PLC north of 400p.
It thinks the potential reinstatement of an investment grade rating and subsequent resumption of the dividend will be key catalysts.
Barclays said despite an expected £300 million of one-off outflows (over-hedging costs/OE concessions), it forecasts Rolls reaching a net cash position of around £750 million in 2024, “a key metric for potential reinstatement of an investment grade rating”.
It forecasts an additional £4 billion in free cash flow between 2024-27 due to the lag effect on cash to profit, improved pricing per flight hour, mix effect profitability/volume of Trent 700 and T1000 provisions in prior years, recognised at very low margin falling away.
The bank has increased its target to 409p from 270p and reiterated an ‘overweight’ rating.
It is the latest vote of confidence in Tufan Erginbilgic's turnaround at the engineer, which was the top performing FTSE 100 stock in 2023.
Just before the Christmas break, Bank of America raised its target to 420p, while anaysts at Citi think the firm is worth 431p per share.
Deutsche Bank is also a fan, with a 400p price target, while arch-bear JPMorgan has also joined the bulls with a 400p price target.