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2026 has been a good year if you own Greggs (LSE: GRG) shares. The stock has rocketed 31% higher to 2,108p at the market close on Friday (9 October) and is seemingly back in vogue having been under immense pressure in recent times.
One broker recently reiterated its price target for the stock at 2,300p. I wanted to dissect the recent gains and analyse whether we’ll see the stock reach that level in the next 12 months.
What’s behind the recent gains?
A strong interim results release on 29 July was a big catalyst for the recent gains. Shares in the company jumped after it announced a 19.7% increase in pre-tax profit to £76m and a 7.2% increase in total sales to £1.1bn.
Positively for shareholders, the company’s strategy seems to be paying off with sales boosted by:
- Menu innovations
- Shop expansion
- Alternative retail environments
The company’s stock price jumped 30% in the last week of July and has managed to extend those gains further in recent months.
But strong recent trading aside, there’s another big factor that I think is supporting the company’s valuation right now.
Scaring off the short sellers?
Let’s rewind to March 2026. The stock was the second-most-shorted in the UK. Short sellers essentially profit when a chosen company’s share price falls, as they can sell high and buy low before delivering their borrowed shares back to the original investor.
Following the recent share price surge, the stock is now sitting 15th in the UK’s most-shorted list. That dramatic reduction in short positions has helped reduce the downward pressure on the stock, but actually provides support as short sellers have to buy shares to cover their potential losses.
Greggs is fighting back after a sluggish period and an improvement in sales growth could prompt short sellers to rethink their positioning.
Dan Coatsworth, AJ Bell, 1 October 2026
Can the stock hit 2,300p?
It’s not just me that’s positive on the stock. Analysts from Berenberg Bank released an updated report on 2 October reiterating their Buy rating with a price target of 2,300p.
That would imply a further 9.1% gain from the current share price. Given the current price-to-earnings (P/E) ratio of 16.4, assuming earnings remained unchanged, at 2,300p this would extend to around 18. That doesn’t seem excessive for a strong dividend share, and we could well see earnings per share climb on the back of the upgraded full-year results.
My verdict
The stock has recovered strongly over the past six months and the company now boasts a market cap of £2.2bn. There are always risks to earnings, particularly if we see a drop in consumer spending over the next year or so or a slowdown in momentum with the turnaround strategy.
However, management has done well to steady the ship strategically and reduce the near-term pressure from short sellers. I think at the current valuation it’s worth considering for investors hunting for a combination of income and growth from a Footsie mainstay.
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Ken Hall does not own shares in any of the companies mentioned.
This story originally appeared on Motley Fool
