Peel Hunt raises Greggs to 'hold'

Analysts at Peel Hunt upgraded Greggs to 'hold' from their previous rating of 'reduce' on Tuesday after the fast-food chain turned in October and November performances that were "significantly ahead of expectations".

The broker said Greggs' patchy spring was "now a distant memory" and owned up to over-reacting to it.

Very much against the run of retail play, Greggs has announced that its performance in October and November has been significantly ahead of its expectations, wrote analysts Jonathan Pritchard and John Stevenson.

"This is clearly a very consistent performer and with a decent upgrade today it’s clear that our negative stance is wrong."

Peel Hunt credited the turnaround to Greggs' newer ranges and improved staff training, which has meant that queue lengths were falling, reducing the number of customers taking a look at the line and going elsewhere.

While the broker was positive regarding Greggs' future prospects, Peel Hunt said: "it's not all in the bag yet, and the next few weeks remain crucial".

Peel Hunt, which also significantly boosted its target price on Greggs's shares to 1,300p from 950p previously, added: "At first glance, we were tempted to go further, but the valuation at the shares' current levels doesn’t appear to have much upside.

"The cash generation, however, will be highly attractive to some and there are many worse places to be if the top down view is a nervous one."