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It’s truthful to say that holders of Greggs (LSE: GRG) shares aren’t having the most effective of occasions. Whereas different FTSE shares have completely soared in 2025, the sausage roll vendor has seen its worth crash by 40%. Certainly issues received’t get any worse?
Properly, I’ve observed one thing that could be slightly regarding for anybody nonetheless holding on.
Worrying improvement
Every time I’m researching an out-of-favour inventory, I at all times make some extent of checking how a lot shorting exercise there’s surrounding it. In different phrases, I look to see whether or not a proportion of merchants are betting that the share value has additional to fall.
Sadly, this appears to be the case with Greggs. In truth, it’s now the sixth-most-shorted inventory in the whole UK market. That’s fairly a swap in sentiment from a yr in the past when the inventory traded above the three,000p mark.
However is that this pessimism justified? To some extent, I feel it’s.
We already know that the scorching summer season within the UK was not excellent news for gross sales of equally-hot treats. As anticipated, buying and selling suffered and questions surrounding the FTSE 250 member’s potential to proceed increasing resurfaced.
The following couple of months of buying and selling will clearly be crucial as the corporate seems to be to capitalise on the return of colder climate and extra folks hitting the excessive streets and retail parks to do their festive procuring.
However with customers persevering with to really feel the influence of upper costs, it’s questionable whether or not even the Greggs worth providing will probably be sufficiently engaging.
Causes to be optimistic concerning the shares
As at all times, it’s important to take a balanced strategy when evaluating any funding.
Having as soon as boasted a valuation as wealthy as one in all its pasties, the shares now commerce at a much more cheap valuation. A price-to-earnings (P/E) ratio of 14 is on par with the UK market common. It’s additionally under the agency’s common P/E over the past 5 years (28).
So, let’s imagine {that a} good bit of unhealthy information may already be priced in. The important thing phrase being ‘may’.
There’s a 4% dividend yield too. And assuming analyst projections aren’t vast of the mark, these money distributions additionally look simply lined by anticipated revenue.
Quick sellers may also be incorrect. If CEO Roisin Currie reveals even a slightly-better-than-anticipated set of numbers in January, Greggs shares might submit a tasty rise. It’s because these betting towards the agency might rush to shut their positions (by shopping for again the inventory they ‘offered’).
Whether or not that momentum comes and lasts is one other factor solely, after all. Nonetheless, it’s price noting that the shares have skilled fairly a number of dips over the past 5 years earlier than bouncing again to kind.
Right here’s what I’m doing
I’ve made no secret of my love for the £1.7bn cap. That is partly as a result of it’s made me some huge cash through the years. Having offered out in 2024 when the valuation began to look frothy for a reasonably unglamorous (albeit high-quality) enterprise, I’m eager to get entangled once more.
However the value must really feel proper. Furthermore, the extent of shorting exercise round this firm isn’t one thing I can recall seeing earlier than. And it’s given me pause for thought.
I’m ready to remain my hand for some time longer, at the very least till the top of the yr.
