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I consider Greggs (LSE:GRG) shares have been vastly overvalued for a while and the collapse over the previous 12 months displays a fall nearer to truthful worth.
However the massive query is: the place will the inventory be in a single 12 months’s time? Nicely, I believed I’d put the query to ChatGPT. In any case, synthetic intelligence has come a great distance lately.
Having requested ChatGPT about a number of shares over the previous week, I wasn’t overly shocked by its nuanced and analyst-led response once I requested it about Greggs.
The AI platform began by noting that any prediction or forecasting would by no means be really correct and that Greggs’s share worth efficiency would mirror a number of issues.
Whereas headline knowledge is essential, ChatGPT additionally highlighted climate as an necessary issue. As famous by Stephen Wright — Idiot author and host of the superb PlayingFTSE podcast — Greggs tends to underperform when temperatures are both too chilly or too scorching.
Anyway, what did ChatGPT predict? Right here’s what it stated:
Placing all of it collectively, right here’s a tough state of affairs:
Base/consensus case: Greggs shares attain round 2,050p-2,200p inside a 12 months, assuming continued restoration in client spending, secure prices, and respectable execution.
Bull case: If Greggs outperforms (sturdy like-for-like gross sales, price management, new development initiatives), they might hit round 2,400p+.
Bear case: If antagonistic climate, price inflation or margin strain chunk deeply, the shares might slip in direction of the decrease analyst bounds (round 1,300-1,500p).
My very own estimate [still ChatGPT] is round 2,100p in 12 months, an inexpensive midpoint given present sentiment and dangers.
Do I agree?
I really assume this forecast is somewhat bullish. It might indicate a near-20% achieve from the shares, and fairly frankly, I’m undecided the place that catalyst would come from.
The enterprise registered 20% earnings development in 2023, however momentum was curtailed in 2024. For 2025, earnings per share are anticipated to fall by 13.4%. In 2026, analysts anticipate solely a modest enhance — round 4%.
As such, it’s buying and selling at 13.7 instances ahead earnings for 2025 and 13.1 instances forecast earnings for 2026.
Trying past the forecasting interval, I’m undecided what traders need to get enthusiastic about. Low cost food-to-go isn’t in vogue. Well being and weight-loss is.
Greggs shops might have additionally reached saturation level within the UK market. They’re already all over the place within the UK and previous makes an attempt at launching abroad haven’t labored.
I’d add that whereas the 4% dividend yield is best than it has been, there’s unlikely to be a lot development in dividend funds within the coming years. That’s what the forecasts are suggesting.
Debt has been rising too. The web debt place now represents round 20-25% of the corporate’s market cap. That’s an enormous change from 18 months in the past when the determine was below 10%.
So, my conclusion? I don’t assume it’s value contemplating. It’s buying and selling close to truthful worth.
