The last two years have been brutal for Greggs (LSE: GRG) shares. They peaked at 3,184p in August 2024 but today trade at just 1,620p. That’s a crash of 50%.
The shares had previously raced ahead of themselves as Greggs stores multiplied and sales and profits rattled along nicely. The moment growth slowed, however, investors bailed out. The FTSE 250 stock has stabilised lately, though. It’s slipped just 3.8% over the last 12 months.
Investors have been fretting over three things: slowing consumer demand, rising costs, and the sustainability of growth. So is there a buying opportunity here?
Can this FTSE 250 stock bite back?
The Greggs share price looks much better value than it did with a price-to-earnings ratio of 13.2. The trailing dividend yield has climbed to a juicy 4.25%. This creates a nice platform for a recovery. But I’m still sceptical, and decided to call in artificial intelligence to see if I was missing something.
ChatGPT is both a brilliant technology and somewhat lacking. One thing it cannot do (and doesn’t pretend otherwise) is to predict share prices. Instead, it hoovered up random information from the web, and turned it into something approximating a view.
The chatbot argued that Greggs still has a major rollout opportunity. “More shops, particularly in high-footfall locations, could drive sales and profit growth if new stores perform well“, it said.
It also highlighted the “strong Greggs brand and a reputation for relatively affordable food”, arguing that this gives it defensive quality at a difficult time for the UK economy. Greggs could swing back into favour when inflation finally slows, it added. In my view, inflation is now just as likely to climb as the Iran war drags on.
ChatGPT added: “If real household incomes improve and consumer confidence returns, Greggs could benefit from higher spending.”
Has the moment passed?
Not exactly a blinding insight. I asked the ‘bot to name some risks, and it suggested hot weather could hit demand for warm food, and highlighted the threat weight loss drugs pose to sales. Plans to grow the Greggs store estate could be scuppered by “market saturation and cannibalisation, where new branches take sales from existing ones”, it added. AI lifted that last bit from The Times, in case you wondered.
ChatGPT raised a few factors worth considering, but I feel slightly short-changed. Instead, I checked up on the human experts. The 15 analysts offering one-year share price forecasts produce a consensus target of 1,701p. If correct, that would see the shares rise a modest 5.1% from here. The excitement surrounding Greggs has evidently cooled.
ChatGPT (rightly) refuses to offer an opinion on where Greggs shares go next but as a human being, I’m free to make my own suggestions. I think this is a solid company but it’s lost that post-vegan sausage roll cult status. There’s a risk the brand could feel jaded when finally we do get an economic recovery.
However, Greggs looks good value and I still think the shares are worth considering. I’m just not excited enough to buy it myself. I can see far better recovery opportunities on the FTSE 100 and FTSE 250, and I’ll sink my teeth into them instead.
Should you invest £5,000 in Greggs Plc right now?
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Harvey Jones does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
