CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

M&S deal could see Ocado shares soar ahead of Q3 earnings

Ocado’s tie-up with Marks & Spencer could generate more than £2 billion in revenue, according to Credit Suisse, with investors eager for an update on the partnership and its overall performance in its Q3 earnings on Tuesday.

  • Ocado set to unveil third quarter (Q3) earnings on 15 September
  • M&S joint venture could see Ocado sales exceed £2 billion, says Credit Suisse
  • Ocado well-positioned to see its share price move to higher highs

Ocado is likely to see its shares climb higher ahead of its Q3 earnings on Tuesday 15 September, after analysts from Credit Suisse explained how the company’s joint venture with Marks & Spencer (M&S) could generate more than £2 billion in sales.

Investors will be eager for an update on its M&S partnership and its overall performance amid challenging market conditions for British grocers.

But despite myriad of headwinds, Ocado stock has performed comparatively well, with it up 4% on Monday to £23.57 per share at the time of publication and up 86% year-to-date.

Ocado likely to exceed analysts expectations, says Credit Suisse

Analysts at the Swiss investment bank expect Ocado to see sales increase by as much 66% over the last three months to deliver more than £600 million in revenue.

Its analysts also believe that the online grocery delivery company will exceed the expectations of many City insiders when it unveils its Q3 results on Tuesday and prove its critics wrong for doubting its ability to handle high levels of demand amid the coronavirus pandemic.

Ocado admittedly did struggle to cope with increased demand for online grocery shopping during the lockdown, with sales climbing 44%. However, analysts at Credit Suisse assured investors that the company has since addressed some of its ‘capacity concerns’.

The Swiss investment bank also warned investors that, despite its share price soaring in recent months, the stock may be overvalued due to investors ‘overestimating’ the number of partnerships it has in the pipeline for its global solutions business, whereby retailers license its technology platform to assist with their online sales.

Citi buys ‘strategic rationale’ of Ocado-M&S tie-up

Earlier this month, analysts from Citi expressed their optimism for the launch of Ocado Retail, the name of its joint venture with M&S.

So confident are they that the launch will be a success, analysts from the US-based investment bank lifted their target price for M&S to 120p per share, implying a potential upside for the stock of 14%.

Citi told investors that it believes in the ‘strategic rationale’ of the partnership and said that Ocado Retail will ‘allow a wider range of customers to reappraise the M&S offer in terms of breadth of range, relative price and quality in addition to delivering volume synergies’.

M&S is trading at 105p per share at the time of publication, with the stock down 51% year-to-date.

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  4. Click on ‘buy’ or ‘sell’ in the deal ticket
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This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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