5 reasons why Greggs’ share price could surge 37% to £22!

Battered by subdued consumer spending, Greggs‘ (LSE:GRG) share price has slumped 24% over the last year to £16.04 today. Once considered a piping-hot growth stock, the FTSE 250 baker has badly crumbled as sales growth has stalled.

But could Greggs shares have now bottomed out? One bullish analyst thinks so, and reckons a sharp rebound to £22 over the next year is on the cards. That would mark a 37% improvement from current levels.

Here are five reasons why this fallen hero could be about to move higher.

Improving conditions

Any recovery in Greggs’ share price will require an improvement in consumer spending power. Despite the company’s low price points, demand for its cheap pasties, doughnuts, and other baked goods have faltered as shoppers’ budgets have eroded.

The good news is we could already be seeing a turning point on this front. Latest official data showed UK retail sales leap 4.5% in January, the fastest rate of growth for almost four years. Can this continue, though? With interest rates expected to keep being cut through 2026, it’s more than possible in my view.

Greggs’ shares could also rise if it stays ahead of the broader market. Latest financials showed sales up a healthy 7.4% in Q4 as it beat the competition. The company’s full-year update is slated for next week (3 March). Given its excellent brand power, I think it’s possible.

Operational progress

I’m also hopeful Greggs’ performance will pick up as its evolving expansion strategy pays off. A key pillar is its focus on higher-growth travel destinations like railway stations and airports. The group is also accelerating rollout of new franchise stores — these have the same enormous sales potential, but in a way that’s far more favourable from a cost perspective.

One other positive is Greggs’ strong record of menu innovation. Tasty new products that hit shelves in Q4 included protein shakes and flatbreads for more health-conscious customers. It has a strong pipeline of new products that could drive sales and boost the share price.

Will this be enough to combat changing consumer tastes, though, as people swap sausage rolls for salads? The pressure is increasing too as the use of weight-loss jabs like Ozempic becomes widespread. But I’m hopeful Greggs has what it takes to keep innovating to great success. Sales from its Balanced Choice healthier range have often outperformed those of its classic products.

Can Greggs’ share price rebound

The fifth and final reason why Greggs could bounce back is that its shares now look dirt cheap. The price-to-earnings (P/E) ratio is 12.8 times, far below the 10-year average of 22.1. The dividend yield is also 4.3%, smashing the long-term average of 2.8%. At these levels, I think it’s a great stock for value investors to consider.

This FTSE 250 stock clearly comes with risk as the cost-of-living crisis endures. But on balance, I think there are good reasons to expect Greggs’ share price to recover in 2026. The average price target among analysts is £17.89, up 12% from today.

The post 5 reasons why Greggs’ share price could surge 37% to £22! appeared first on The Motley Fool UK.

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Royston Wild has positions in Greggs Plc. The Motley Fool UK has recommended Greggs Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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