The Greggs (LSE: GRG) share price has more than doubled since my bullish call last September. Sure, other stocks will have seen even bigger gains as part of the big market recovery. But I still think that’s a pretty sweet result for those who were brave enough to buy last year. In fact, I think more gains lie ahead. Here’s why.
Greggs share price: on a roll
It would be easy to assume my main reason for thinking the Greggs share price could continue climbing is down to the “great unlock” of the UK’s high streets. Of course, this should help. After all, many of the company’s 2,000-plus shops are located in now-bustling towns and cities. Then again, I also believe quite a bit of the positivity surrounding this is priced in already.
What’s perhaps not priced in so much is the recovery in earnings once overseas travel is allowed to resume. The FTSE 250 has a presence in, or near, many airports in the UK. I suspect that some of the 100 net new stores it plans to open in 2021 will be based at travel hubs. The likelihood there’ll be many more people taking staycations this year also bodes well for sites at service stations.
Another reason for being optimistic is news the FTSE 250 baker will shortly be trialing two new vegan products, a sausage bap and a ham and cheese baguette. This should provide another boost to Greggs’ bottom line if they can replicate the success of its vegan sausage roll in 2019 and vegan steak bake in 2020. Investors may buy in anticipation, raising the Greggs share price higher.
Third, the lack of reaction to the company reporting its first annual loss since listing in 1984 suggests people are willing to cut the £2.4bn-cap some slack.
Even the remark that profits wouldn’t return to pre-Covid levels until 2022 “at the earliest” doesn’t appear to have shaken conviction. This shrug of the shoulders from the market should put support under the Greggs share price. In fact, any indication whatsoever that it may have been too conservative on the speed of its recovery could see the stock rocket in value.
Of course, nothing can be guaranteed. Like all companies, Greggs still faces a number of uncertainties going forward.
Chief among these is the potential for a significant third wave of the coronavirus. Yes, the vaccination programme has been a huge success, so far. However, the possibility of a new variant hitting the shores mustn’t be dismissed.
Greggs’s digital offering should cushion some of the blow if this were to happen. Then again, it’s unlikely to prevent the company’s share price from falling, along with everything else in the UK-focused index.
Just how many people go back to their normal routines once restrictions are fully lifted is another unknown. Greggs earns a lot of money from office workers. The possibility that many businesses will encourage staff to work at home more often wouldn’t be ideal. Uncertainty over the impact of higher unemployment levels could also weigh on sentiment.
Full-year numbers are due mid-May. As things stand, I suspect we could see further positive momentum to the Greggs share price next month and beyond. That said, I’ll remain diversified elsewhere, just in case.
Paul Summers owns shares of Greggs. 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.