- Rolls-Royce has dropped by nearly £1 in the last two weeks amid heightened concerns over supply chain disruptions
- High valuation has raised the bar on the company and it now has to register forecast-beating earnings and give optimistic guidance
- Rising geopolitical tensions, especially in the Middle East could trigger increased defense spending, which is bullish for Rolls-Royce
Rolls-Royce (LSE: RR.)has come back strong in the FTSE 100 in recent years, but even the best companies face challenges. After its stock rose to nearly 1,300p in January 2026, it has lost some steam. Rolls-Royce stock price recently tested the 1,200p level, which has some people worried about a bigger drop. Let’s look at why the stock is down, what could make it go back up, and what risks are out there, based on what the market is saying.
Why Did Rolls-Royce Stock Go Down?
The recent drop in Rolls-Royce stock didn’t happen because of one big thing. Rather, it was because people took profits and there were new problems. The supply chain is also a factor. A Yahoo Finance UK article on December 8 said that analysts are concerned about hold-ups, which could hurt engine deliveries.
Since Rolls-Royce’s Civil Aerospace income is closely tied to wide-body aircraft deliveries and engine flying hours, investors get nervous if production slows down. Recent supply-chain warnings from Airbus have investors worried.
A Potential Rebound
If Rolls-Royce wants to get back to 1,300p, it needs to show that its turnaround under CEO Tufan Erginbilgiç is still working. The company is valued highly right now, at about 40 times its expected 2026 earnings. It needs to do more than just hit expectations; it needs to raise its future targets again.
The newly announced £200 million share buyback program, which started in early January, could also help boost the stock. On top of that, full-year 2025 results on February 26 could beat expectations. If operating profit reaches £3.1bn-£3.2bn, the stock could jump. Also, if the company can prove that engine flying hours are still rising, investors will likely take back control.
The Underlying Risks
It isn’t all blue skies, though. A January 20, 2026, report from Yahoo Finance UK listed four risks: supply chains, competition from GE and Pratt & Whitney, a weak dollar hurting exports, and its high valuation. Besides supply chain issues, the geopolitical situation is a concern.
While defense spending is up, any increase in conflict in the Middle East that disrupts global travel could hurt the Civil Aerospace division. A Yahoo Finance UK article of January 8 said that there might not be much appreciation in 2026 unless there is positive news, because optimism is already priced in.
Basically, even though Rolls Royce fundamentals are still good, the drop shows a pause after excitement. A recovery might require beating earnings expectations and positive news in defense, but risks could make the dip last longer.
Rolls-Royce Stock Price Prediction
Rolls-Royce has its RSI at 49 and that signals an underlying weakness. The upside will likely prevail if action stays above 1,200p. Its key support is firmly established at the 50-day EMA level at 1,191p, with the second one at 1,178p. If the price goes up, there is immediate resistance at 20-day EMA at 1,230p, with the next major obstacle at 1,245p.
Rolls-Royce stock price on the daily time frame with main support and resistance levels on January 30,2026. Created on TradingView
The drop is mainly because people are taking profits after a record-breaking rise, along with supply-chain worries and temporary flight disruptions in the U.S. that could affect engine flying hour revenues.
Defense is a massive tailwind. Increased NATO spending and geopolitical tensions in 2026 could increase demand for Rolls-Royce’s propulsion systems and submarines, which provides a safety when the civil aviation sector faces problems.
Supply chain disruptions, competition, dollar weakness, and high valuations pose threats, potentially limiting margins and prompting corrections.