Greggs (LSE: GRG) has delivered a painful ride for shareholders over the past two years, shedding roughly 40% of its value in that period.
A £5,000 investment made 24 months ago would now be worth approximately £3,000, excluding any dividend payments received along the way.
Despite that sharp decline, a recent trading update has given some investors reason to reconsider whether the stock now offers genuine value at current levels.
For the first 19 weeks of 2026, Greggs reported like-for-like sales growth of 2.5% year on year, with momentum clearly building as the period progressed.
Growth in the latter 10 weeks of that 19-week stretch accelerated to 3.3%, suggesting that underlying consumer demand for the bakery chain’s products is holding up reasonably well.
The company also noted that its partnerships with franchisees and grocery retailers are progressing well, contributing to the overall sales growth seen across the business.
Management highlighted that forward buying of key commodities should offer some protection against near-term inflation pressures, though it flagged that ongoing Middle East instability could push overall cost inflation higher through the end of 2026 and into 2027.
On the negative side, analyst Andrew Wade at Jefferies recently downgraded Greggs from a Buy to a Hold, lowering the price target to 1,610p over concerns that high-spending customers may begin to pull back on purchases.
Wade’s concern centres on the potential impact of weight-loss drugs, which some analysts believe could reduce habitual snacking behaviour among the chain’s most frequent and highest-spending customers.
Adding further caution to the outlook, short sellers are reportedly targeting Greggs shares aggressively, with institutional investors positioning themselves for further price declines in the stock.
Short sellers do not always get their calls right, but they typically conduct rigorous research before taking positions, making their presence in a stock a notable warning signal for prospective buyers.
On valuation, the stock trades at a price-to-earnings ratio of approximately 13.3 times earnings forecasts for the current year, which is relatively modest but not deeply discounted by historical standards.
If operational performance continues to improve, there is scope for an upward re-rating, but any deterioration in trading results could easily push the multiple lower still.
The dividend yield currently sits at around 4.2% based on the 2026 forecast, with dividend coverage expected at approximately 1.8 times, suggesting the payout is reasonably well protected for now.
Balancing the improving sales momentum and accessible valuation against the weight-loss drug risk and short-seller pressure, Greggs remains a genuinely difficult stock to call with confidence at this stage.
