Ocado: Buyers and profit takers battle it out
10th July 2018 11:43
by Richard Hunter from interactive investor
After a meteoric rise since nailing a string of big contracts, Richard Hunter, head of markets at interactive investor, analyses reaction to Ocado's latest half-year results.
Ocado describes itself as "the online supermarket", but the reality is that its true potential lies elsewhere.
The group is looking to capitalise on its leading technology platform and, quite apart from the existing arrangements with Morrison (Wm) Supermarkets, the company has recently signed deals with companies in Canada and Sweden.
It is the deal with The Kroger Co of the US, however, which has captured the imagination of investors with its eye-watering potential to transform Ocado into a technology business – and it appears that the company has not yet finished, with more deals expected in the medium term.
In terms of the immediate numbers, group revenues increased at a good clip, net cash is available for the increased investment required into the ever-changing business, and the outlook statement is unsurprisingly upbeat.
Whether there is execution risk whilst Ocado grows at such pace remains to be seen, and the temporary swing to a pre-tax loss is understandable given the company’s current phase.
In addition, with Ocado's position as a growth stock, there is no dividend in sight, although the share price performance has more than compensated.
As such, an increase in the price of a staggering 256% over the last year, compares to a 4.6% hike in the wider FTSE 100, and is evidence of the excitement which has gripped investors.
Indeed, the shares have jumped 92% in the last three months alone, without dampening expectations as the general market view of the company remains at a 'buy', despite this stratospheric rise and regardless of some inevitable profit-taking as seen in early trade.
Source: interactive investor Past performance is not a guide to future performance
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