Like a piping hot cheese and onion bake fresh from an industrial-sized oven, Greggs PLC (LSE:GRG)’s third-quarter results were not everyone’s cup of tea, but they provided a quick calorie hit to keep investors sated for now.
Moving on from that clunky analogy, Barclays PLC (LSE:BARC) acknowledged that despite the strong business model and ongoing growth via new stores, investors may focus on the softer third-quarter performance.
Total sales were up 10.6% in the 12 weeks to 28 September, compared to 20.8% in the same period in 2023.
Company-managed shop like-for-like sales were up 5%, nearly two-thirds below the 14.2% rate of growth in 2023.
September saw a noticeable improvement in trading conditions, but given Greggs’ premium valuation of around 23 times forward price to earnings (PE), the bank expects some near-term weakness in the share price.
Barclays’ 12-month price target of 3,335p implies a meandering 10% upside from today’s sluggish share price (2,998p following a 4% intraday dip, to be precise).
Panmure Liberum also reckons Greggs shares are nearly fully priced. Despite upgrading full-year profit-before-tax targets by mid-single digits, the investment bank downgraded the stock from buy to hold, albeit with a price target nudged up from 3,100p to 3,300p.
“Trading momentum is strong but normalising,” said Shore Capital Markets, which also slapped a hold rating on the stock.
Jefferies summed up the okayish response to the results by stating: “A solid update from Greggs with the marginally softer LFL trend being offset by an improved cost outlook and a stronger exit rate.
“While we note limited Q3 volume growth, we expect little change to consensus today, and retain our positive stance.”