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Greggs (LSE: GRG) shares are all the trend. We see this on the Idiot. Traders gobble up articles on the UK’s favorite bakery chain. Synthetic intelligence (AI) has evidently taken notice of its reputation.
This morning, I requested the AI chatbot to call 2 FTSE 250 shares that look properly positioned to surge in worth in 2025. Its first suggestion was fantasy video games producer Video games Workshop. Because the inventory entered the FTSE 100 in December, ChatGPT’s behind the occasions. As is commonly the case, in my expertise.
Its second decide was good outdated Greggs. ChatGPT praised the group’s strong growth because it will increase retailer depend and spend money on on-line channels.
Is that this FTSE 250 inventory previous its greatest?
There was no point out of the current slowdown in gross sales, which made me cautious. Then I found that the reply to my query was lifted from an article written in September and rather a lot’s modified since then.
Clearly, ChatGPT’s a pc programme fairly than a inventory tipster. And to be honest it’s the primary to confess it. It’s enjoyable to play with however should be handled with excessive warning. Proper now, I’d say the identical about investing in Greggs.
The shares had an excellent run, because of a witty advertising drive that neatly positioned its sausage rolls and different pastry-based produce as an inexpensive deal with in tough occasions. Naughty however good and nothing to be ashamed of.
As confidence grew, the board made bold plans to spice up retailer depend from 2,500 to three,500, goal night openings, and pioneer retailers in railway stations, retail parks, airports and the like.
Revenues rocketed from £811m in 2021 to £1.8bn in 2023. No surprise traders cherished it. On 9 January, we realized they topped £2bn in 2024. However there was a catch.
Within the first half of final 12 months, whole like-for-like gross sales rose 13.8%. That slowed to 10.6% in Q3 and simply 7.7% in This fall. Customers are struggling proper now, with the board blaming “extra subdued excessive avenue footfall”.
Margins are being squeezed
As we all know, the UK economic system’s having a troublesome time. Progress has just about flatlined for the reason that election, and a recession’s attainable. Even Greggs will wrestle to develop given the gloomy outlook for the excessive avenue. Price range employer’s nationwide insurance coverage and minimal wage hikes will squeeze margis.
The board’s ploughing on, with a robust pipeline of latest store openings, whereas shuttering underperformers to maintain margins excessive. It’s additionally broadening its menu and enhancing digital capabilities, whereas engaged on its provide chain.
However analysts are forecasting gross sales development of simply 2.9% within the 12 months forward. If appropriate, that will mark an additional slowdown.
On the plus aspect, the shares are cheaper. Final 12 months, they’d a price-to-earnings ratio of greater than 22. That’s now slipped beneath 17 occasions.
Some far-sighted traders would possibly take into account this a possibility to purchase Greggs shares, which can get well when the economic system does. I don’t suppose we’re there but and can be purchasing elsewhere for FTSE 250 bargains. No matter ChatGPT ‘thinks’.
