Image source: Getty Images
Panmure Liberum has raised its price target on Greggs‘ (LSE:GRG) shares from 1,560p to 2,440p and upgraded them from Hold to Buy. That’s a 56% increase in one move, which is unusual even by the standards of UK mid-cap research.
When a broker increases a target by more than 50% in one go, I don’t immediately hit the Buy button. I start asking questions.
The upgrade follows a strong third-quarter update, but Greggs’ shares have already moved sharply higher.
So the key question is simple: has the market already priced in the recovery?
Why Panmure Liberum turned bullish
The catalyst was Greggs’ Q3 trading update for the 13 weeks to 26 September. Total sales rose 7.7%, while like-for-like sales at company-managed shops increased 3.4%. That’s a clear improvement from the 2.1% like-for-like growth recorded in the first half.
Management said trading was supported by new products and more settled weather in August and September. Importantly, it also raised its full-year 2026 outlook, saying it now expects a “modestly improved” outcome after stronger trading and continued cost control.
There’s also an efficiency story. The baker has proposed consolidating its manufacturing operations, with four sites potentially closing and around 740 roles at risk. The company expects restructuring costs of about £60m, but annual savings of roughly £20m across 2028 and 2029.
Panmure Liberum’s argument is that Greggs is moving from an earnings-downgrade cycle into an upgrade cycle. In plain English, the company has stopped disappointing investors and started giving them reasons to raise forecasts.
The broker said:
“With the company rapidly pivoting from an earnings downgrade cycle to an upgrade cycle, alongside improving cash generation, we move back to buy with a 2,440p target price.”
That’s a compelling case. But it isn’t the whole story.
Why some investors remain cautious
Here’s the contradiction. Deutsche Bank raised its Greggs target from 1,330p to 1,420p, yet kept a Sell rating. Meanwhile, the average broker target is around 1,963p, below the share price of about 2,138p. The consensus rating remains Hold.
That tells me the market may already reflect much of the good news. Greggs has delivered a better quarter, but its shares have rallied quickly. Buying after a strong run means paying today’s price for tomorrow’s execution.
There are real risks too. Management’s flagged greater inflationary pressure in 2027, which could squeeze margins. The £20m of annual savings are also still ahead rather than in the bank.
Long story, short? A 2,440p target’s not a promise – it’s just one analyst’s estimate of what could happen if everything goes right.
My take
Obviously, buying a stock just because one broker upgraded it isn’t smart. But in this case, the bull case for Greggs is credible: sales are improving, guidance has been raised and cost action could support profits.
I’d say a sensible approach is to consider Greggs as a strong watchlist candidate, rather than an automatic buy. Its upcoming full-year results could give a better idea whether this recovery is real.
However, if you’re looking for something with a meaty yield, we’ve identfied a top FTSE 100 dividend stock that’s looking very attractive right now…
What income stock do we like better than Greggs Plc right now?
One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.
And the best bit is that you can see if for yourself, right now, absolutely free of charge!
No jargon. No hard sell. Just a clear look at an income share we think is worth your time.
Mark Hartley owns shares in Greggs.
This story originally appeared on Motley Fool
