Can Ocado Maintain M&S Momentum?
Spreadex | Mar 18, 2019 11:24
Can Ocado (LON:OCDO) maintain its M&S momentum following Tuesday’s first quarter trading update?
The online supermarket has gotten off to quite the start in 2019. Opening at £8.14, the stock – which was the best performing FTSE 350 firm in 2018, despite a significant drop-off in the second half of the year – overcome an early February wobble en route to a current trading price of £11.29 (Spreadex, 18/03/2019). That’s the best price since the end of July, and leaves Ocado very close to the all-time highs struck in the months that followed the announcement of its Kroger (NYSE:KR) deal last May.
February 5th saw Ocado release its full year results. While group revenue rose 12.3% to just shy of £1.6 billion, the stock saw its pre-tax losses widen to £44.4 million due to the firm’s ‘continued investment’ in its future and the ‘increased depreciation charge’ from its new customer fulfilment centres.
Quickly, however, the supermarket drew attention from those results with the announcement of a potentially game-changing deal. On February 27th Ocado and Marks & Spencer (LON:MKS) revealed the creation of a 50/50 joint venture, trading as Ocado.com and costing M&S £750 million.
The merger of sorts combines the ‘highly regarded branded food and beverage range’ of M&S with Ocado’s ‘own label and third party branded products’, and will come into effect by September 2020, replacing the online supermarket’s long-standing agreement with Waitrose. The switch also means Ocado would no longer incur sourcing fees payable to Waitrose, which in 2018 cost more than £15 million.
Investors may be after some further details on the M&S tie-up on Tuesday; whether they’ll be readily available, however, is unclear. As for the Q1 figures themselves, a continuation of the double-digit sales growth posted in 2018 is required, given the stock’s recent surge. Any word on another international deal would also be more than welcome.
Ocado Group PLC has a consensus rating of ‘Hold’ alongside an average target price of £8.57.
"Disclaimer: Spreadex provides an execution only service and the comments above do not constitute (or should not be construed as constituting) investment advice or recommendations, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any person placing trades based on their interpretations of the above comments does so entirely at their own risk. Spreadex Ltd is a financial and sports spread betting and sports fixed odds betting firm, which specialises in the personal service and credit area. Founded in 1999, Spreadex is recognised as one of the longest established spread betting firms in the industry with a strong reputation for its high level of customer service and account management.
Get The App
In relation to spread betting, Spreadex Ltd is authorised and regulated by the Financial Conduct Authority. Spread betting carries a high level of risk to your capital and can result in losses larger than your initial stake/deposit. It may not be suitable for everyone, so please ensure you fully understand the risks involved."
Original post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.