RBC Capital analyst Ross Broadfoot initiated coverage of Greggs (LON: GRG) with an Outperform rating and a 3,240p price target in a recent note.
The bank’s analysts argue that the bakery chain’s shares “have been oversold” despite improving fundamentals.
Broadfoot highlighted Greggs’ recovering momentum, pointing to its “recovering LFL exit rate in September” as a sign of resilience.
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While cost pressures, particularly in labor, are said to remain a concern, RBC believes the company has shown a strong ability to mitigate these increases.
The bank expects rising wages among Greggs’ core customer base, coupled with improving household finances, to offset most of the inflationary impact.
RBC believes the outlook for Greggs remains robust, with Broadfoot forecasting an 11% organic growth compound annual growth rate (CAGR) from FY23 to FY26.
He also pointed to the group’s long-term growth strategy, which includes a “c.7-year rollout” of new locations, ensuring Greggs remains “firmly in growth territory” as it expands its footprint.
Broadfoot also described Greggs as a “high-quality compounder,” suggesting that the company has the potential to return to its historic valuation multiples.
Furthermore, the analyst sees scope for “further cash returns as capex eases.”
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