The Motley Fool

Is the Greggs share price cheap enough to buy?

Lockdown has been hitting Greggs (LSE: GRG) hard. Forced to close 2,000 of its stores, it reported first-half losses of £62.5m. Its share price is almost half of its January peak, and though this may seem cheap, I think there are signs it has further to go.

Second wave

The main problem I can foresee for Greggs is a potential second wave of Covid-19 in the UK. Though it is far from certain we will see such an event on a national scale, any new lockdown would be a body blow to the company.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Just this week Greggs said it was asking its banks for additional finance to help its liquidity, and specifically cited the potential for a second outbreak. We are already seeing regional lockdowns. Just today, Boris Johnson has had to pull back some of the previously planned relaxation of social distancing rules.

While these regional lockdowns are not as yet, shutting down shops specifically, wariness in those areas is not likely to have customers rushing to stores. During the recent lockdown in Leicester, for example, Greggs only kept three of its ten stores open, and reported far less trading than normal.

Greater Manchester has similarly just been locked down. This is another key location for Greggs. It seems even without a national lockdown, the company will has more suffering to come.

Upsides for Greggs?

All this said, there are some positive things to note for Greggs. It is currently suffering less than rivals, such as Pret A Manger, due to its store locations. While companies such as Pret have focused locations near major office hubs, Greggs has far more locations on high streets. While everyone is working from home, this is a key advantage.

Greggs also has a strong brand and customer loyalty to fall back on. Its finances have always been strong. Before the pandemic, for example, Greggs increased its profit expectations five times in rapid succession. If it can weather this Covid-19 storm it seems likely it will make a full recovery.

It has also been trialling concessions in Asda supermarkets. Greggs has said it plans to increase this effort, which again should offer it somewhat of a safety net for its bottom line. The company is also looking into various delivery options, which could also help profits during a potential second wave.

Time to buy?

Personally, I do think Greggs is a good long-term investment, but I think there is more room in the share price to go lower just yet. Even without a full scale Covid-19 resurgence, it now seems almost certain the UK will not be getting back to normal this year.

Greggs will see its finances hurt further if this is the case. I would expect its share price to follow suit. When it does, however, I will be ready and waiting to snap up the bargain.

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Karl has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.