Ocado reports reduced pre-tax losses, revenue increase, and positive future outlook

From Morningstar: 2024-07-15 20:26:00

Shares in Ocado soared 15.8% following news of reduced pre-tax losses of £154 million for the first half of the year and a revenue of £1.54 billion. The company’s technology solutions business saw a demand spike of 21.8%, leading to a positive boost for the struggling online grocer. Despite a recent share price slump of 12%, year-to-date shares remain down 48.7%.

Ocado’s struggles can be attributed to a cost-of-living crisis and a return to more traditional shopping habits. Online ordering has dropped from 14% to 11% of the market, impacting the company’s performance. Delays in final payment for its stake sold to Marks & Spencer, coupled with a legal battle and store closures by Kroger, have added to the challenges faced by Ocado recently.

Morningstar reports an uptick in revenue and adjusted EBITDA for Ocado, with a positive outlook for future profitability. The company’s technology division, particularly the Ocado Smart Platform, has been a key driver behind the recent share price increase. Pontikis from Morningstar maintains a 5-star rating for Ocado, highlighting its undervaluation and growth potential.

Ocado is expected to see improvements in cash outflow and has access to significant credit lines to fund growth. Pontikis emphasizes the company’s global opportunities and future partnerships as justification for a Fair Value Estimate of £9.20. With a focus on capturing a high market share in digital grocery markets, Ocado’s long-term prospects remain promising.



Read more at Morningstar: Ocado Shares Soar on Better-Than-Expected Results