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Greggs shares rally ahead of trading update

The boom times for Greggs came to an end earlier in the year, and while it has seen a recovery in its business, the return of restrictions provides a gloomy outlook for the shares, even after their 50% fall.

When does Greggs release its trading statement?

Greggs publishes its next statement on 28 September.

Greggs statement – what to expect

Greggs was once on a roll. It was opening more stores in city centres to benefit from the never-ending flood of commuters. But that flood did come to an end with Covid-19. That key part of the business has remained in their homes due to lockdown restrictions, and as a result it swung to a huge first-half (H1) loss of over £60 million, from a £40 million profit a year earlier. Sales did rebound in July, but with lockdowns apparently on their way back it will be tough for the group to be particularly upbeat about what comes next.

How to trade Greggs’ earnings

Of the current analyst recommendations, five have ‘buys’, with one ‘hold’ and two ‘sells’. It is notable that bullish sentiment has increased since June even as the share price resumed its decline. At 23 times forecast 2021 earnings the shares are expensive relative to the recent past, but at least the dividend yield remains steady around 2.3%.

Greggs share price – technical analysis

Greggs’ fall from grace has been rapid and unrelenting. Those brave enough to step in at the March lows saw it go from £13.00 to £19.00 in the space of two months. But momentum stalled, and the decline from the May peak was dramatic. Lower highs at £11.60 and £11.20 have been seen, and while the slowing pace of these lower highs may provide a bullish short-term view, there is a lot of work to be done to repair the outlook.

A continued rebound would target trendline resistance from the June highs, which would suggest a bounce towards £12.80. From here resistance from the February highs comes into view.

Hopes of a recovery stalling

Greggs shares might be at less than 50% of their value from February, but the outlook is grim. From riding high the company is now in damage control mode, hoping that the renewed restrictions can be lifted relatively soon. Having done so well out of office workers, the company now faces a period of retrenchment.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.

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