Financial Trading Blog
Stock of the day 08/12/2015 – Ocado Group PLC
After a bit of a wobble between the start of February and the end of June things were looking good for Ocado in the middle of 2015. Starting the year at £3.85 the stock had hit a 16 month high of £4.62 by the middle of July following a stellar set of half year results that saw Ocado post a 15.7% rise in gross sales to £511.9 million and an 18.2% jump in revenue to £507.7 million counter a 2.4% fall in the average order size to £111.70. Even more exciting was Ocado’s promise that it had its sights set on closing the year with an international joint venture (something, incidentally, that has failed to materialise so far).
(Source: IT-Finance.com 08/12/2015)
Yet the bogeyman of the retail sector, Amazon, soon threw a spanner in the works as reports circulating that the online giant was set to launch its Amazon Fresh food delivery service in the UK. Ocado plunged 13% across the second half of July alone, its decline culminating in a 10 month low of £3.09 by mid-September.
Its third quarter update in September helped get the stock back on track, with a 15.3% rise in retail sales to £252 million and a 16.6% increase in average weekly orders (and another 1.1% drop in the average order size) putting the company on track to cross the £4 mark and hit £4.13 by the start of November.
Frustratingly Amazon chose this moment to rear its ugly head once again, the UK launch of its Amazon Pantry service wiping 17% off of Ocado’s stock price, leaving it back at £3.45 by the middle of November. Once again Ocado had to pick up the pieces and start again, something it has managed with some success, climbing to a current trading price of £3.65 (IT-Finance.com, 08/12/2015).
In terms of its Q4 figures, analysts at Deutsche Bank are expecting a 15% increase in year-on-year retail sales with a 17% rise in average weekly orders and 1% fall in average order size. One also imagines that any mention of its international venture, however unlikely said mention may be, would be much appreciated by investors, as would any reassurance over the impact of Amazon Pantry.
Ocado Group sits at a consensus rating of ‘hold’ with an average target price of £4.21.
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