MIDAS SHARE TIPS UPDATE: Hold on to flaky Greggs
MIDAS SHARE TIPS UPDATE: Hang on to the volatile Greggs
Investors in Greggs will feel that their bag is either half full or half empty, depending on when they take a bite from the chain.
Midas has followed the sausage roll seller for years, as the high street stalwart added a favorite evening in Leicester Square and launched a successful clothing tie-up with Primark.
Greggs the rise was meteoric, but the trajectory of its share price was more complicated. Midas has followed this all the way.
Tasty: Midas has followed the sausage roll seller for years, as the high street esteemed high street outfit added a Leicester Square late-night favorite and launched a successful clothing tie-up with Primark
We first recommended the stock in 2009 at £3.65, but advised investors to accept earnings in May 2021 at close to £25. In October last year, after the shares fell back to £17.70, we said they might be worth another bite. Those who did were handsomely rewarded, with shares closing at £23.82 on Friday.
The question on our lips, given that Greggs shares are down 14 per cent in the past six months, is whether its strategy is as shaky as dough, or whether it has a sweet future.
This week’s third-quarter data offers some clues. Like-for-like sales rose 14 percent in the quarter to the end of September and there were signs of easing inflationary pressures on spending.
So why the wet bottom in the share price? One concern, says Russ Mold of DIY investment platform AJ Bell, is that while Greggs was targeting 150 vacancies, it is now aiming for 135 to 145. As Mold says, this is hardly catastrophic, but it could to mean that Greggs is close to having enough objects already.
Those hoping for improved sales guidance were also disappointed. Greggs said the results would be in line with expectations.
The Judgment of Midas: Greggs’ update sent shares down 3% on the day, suggesting investors were looking for something softer. However, the baker is still relatively highly valued. Trading at 20 times forward earnings this year, with a yield of 2.5 percent, the business looks like a perfectly edible cake, but without the frosting expected in this week’s results. The stock is still worth holding while we wait to see how successful the current expansion plan will be.
Traded on: Main market Ticker: GRG Contact: corporate.greggs.co.uk or 0191 281 7721