When Rolls-Royce (LSE:RR.) shares hit the headlines, it’s usually because of something extraordinary. But in recent weeks, the aerospace giant finds itself in an unlikely competition with an even bigger story: the Space Exploration Technologies (SpaceX) IPO.
On 12 June, SpaceX made its long-awaited Nasdaq debut as the largest IPO in stock market history, raising $75bn. In the space of a few days, the shares surged as high as $225 before tumbling back down. And they’re now hovering near the closing price on IPO day at around $160.
In other words, investors who piled in on IPO day have made almost nothing after weeks of nail-biting volatility.
Rolls-Royce shareholders, meanwhile, have quietly pocketed a 13% gain over the same period, turning a £1,000 investment into roughly £1,130 without losing a wink of sleep.
The question now is: will Rolls-Royce shares continue to outperform?
Why Rolls-Royce keeps defying gravity
The group’s latest trading update confirmed that this isn’t a story built solely on hype. Underlying operating profit guidance of £4bn-£4.2bn and free cash flow of £3.6bn-£3.8bn for 2026 were both maintained in full.
Large engine flying hours grew 5% in the first quarter to 115% of 2019 levels. And crucially, Middle Eastern airline flying hours have already fully recovered to pre-conflict levels, ahead of most analyst expectations.
Defence is accelerating too. Original equipment deliveries grew more than 20% year-on-year in the first quarter, powered by surging demand for the EJ200 Eurofighter engine and a landmark contract to power Australia’s new frigates with the MT30 marine gas turbine.
Furthermore, the Power Systems segment may be the most exciting story of all. Power generation order intake grew 50% year-on-year in the first quarter, driven by data centres and government contracts, with the division’s order backlog now standing at £7.3bn.
Put simply, the business is firing on all cylinders. So should investors hop aboard the gravy train?
Is there anything to worry about?
The Middle East conflict remains the most significant risk to watch. While flying hours have recovered better than expected, management was careful to note it is “monitoring the situation for any future direct and indirect impacts”.
Any renewed escalation could weigh on civil aerospace flying hours and, in turn, the high-margin aftermarket revenue that powers so much of Rolls-Royce’s cash generation.
Such short-term disruptions are unlikely to be disastrous in the grand scheme of things. But they might be sufficient to ensure the company falls short of its targets. And after surging more than 900% in three years, even the slightest disappointment might be all it takes to spark some profit-taking activity.
So what’s the verdict?
SpaceX may represent the future of space exploration in the private sector, but the business continues to trade at a lofty valuation that’s yet to prove itself. In other words, right now investing in SpaceX feels more like speculation than prudent investing.
As for Rolls-Royce, this aerospace stock’s also running a little hot. But unlike SpaceX, that premium valuation has been well-earned. So for investors looking for exposure to the aerospace sector, Rolls-Royce feels like the smarter play right now, in my mind. And that’s why I think it could be worth a closer look.
Should you invest £5,000 in Rolls-Royce Plc right now?
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Zaven Boyrazian does not hold any positions in the companies mentioned.
