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It doesn’t really feel controversial to say Greggs (LSE: GRG) shares have disenchanted buyers in 2025. As I sort, the worth of this one-time inventory market darling has tumbled nearly 40%. That has to sting provided that the FTSE 100 is up almost 20% over the identical time interval.
Even the UK-focused FTSE 250 index — which options the food-on-the-go retailer — is up 8%.
Might there be much more ache on the best way for holders in 2026?
Powerful promote
The plight of Greggs isn’t a thriller. Put merely, like-for-like gross sales progress has slowed. For years, such a factor was unthinkable for the sausage roll vendor.
At the least a few of this decline is right down to a critically sizzling UK summer time. When temperatures had been excessive, the very last thing folks wished to munch on was a heat pasty.
The broader financial atmosphere hasn’t helped. Greggs could also be focusing on budget-conscious shoppers nevertheless it doesn’t appear to have escaped the discount in discretionary spending as folks attempt to maintain their heads above water.
Mix all this with rising prices — comparable to increased Nationwide Insurance coverage contributions — and it was nearly inevitable that revenue warnings and cuts to expectations would observe.
Is the worst over?
Dealer JP Morgan is now a believer, setting an Chubby ranking on the inventory at first of December. In its view, the corporate is nicely positioned to learn as lots of its friends battle. A worth goal of two,110p has been set — 22% increased than the place it at present stands.
I feel most holders can be fairly completely satisfied if that got here to go. The share worth has already rebounded 17% within the final month.
This brings me to a different factor that helps the funding case because it stands right now…
Greggs shares ‘look’ like a cut price
This inventory is an terrible lot cheaper than it as soon as was. We’re speaking a few price-to-earnings (P/E) ratio of 14 for FY25. For comparability, the P/E was excessive as 30 in 2024.
Greggs’ present valuation would possibly now be on par with the long-term common amongst UK shares however, personally, I feel it’s an above-average enterprise. Whereas margins and returns on capital have been sliding, they’re nonetheless greater than passable. The core enterprise mannequin stays stable too.
For those who like passive earnings, the dividend yield sits close to 4%.
A favorite with brief sellers
Not everyone seems to be satisfied. Greggs is at present probably the most shorted inventory in our house market. In different phrases, a major variety of merchants are betting that the share worth has additional to fall. That is hardly an excellent signal.
Quick sellers could be flawed, in fact. If the £1.8bn cap places out a better-than-expected replace on This autumn on 8 January, we might see a rush to shut their positions. This would possibly simply result in an almighty rise in Greggs inventory on the day and mark an important begin to 2026.
However a poor set of numbers might simply undo the constructive momentum witnessed in the previous few weeks.
As issues stand, I’m completely satisfied to take a seat on my fingers for some time longer.
