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FTSE 100: Ocado’s share price hovers close to major support ahead of Q1 trading statement

Can a positive first quarter trading statement help the Ocado share price recover this year’s steep 31% losses?

Ocado Source: Bloomberg

Ocado share price close to major support ahead of Q1 trading statement

The descent in the Ocado Group PLC share price by some 31% year-to-date as the online retailer suffers from its customers looking for cheaper alternatives at rivals such as Tesco PLC’s or discount retailers Lidl and Aldi, seems to have temporarily halted around the 400 pence mark, ahead of Tuesday’s first quarter trading statement.

Ocado’s business model of providing quality grocery goods in partnership with Marks & Spencer Group PLC at relatively higher prices than its competitors amid the cost-of-living crisis may have lowered its market share in the first quarter of 2023.

Three weeks ago, the British online grocery retailer announced that it was pausing the roll-out of a new distribution centre in the UK after making a record annual loss of more than £500 million at the back end of last year as customers were reining in spending on more expensive goods.

In the first quarter of this year Ocado’s fortunes may have improved, however, as sales might have surged around Valentine’s Day as shoppers splashed out on lucrative dinners and alcoholic beverages.

How to trade Ocado’s first quarter trading statement?

On Tuesday 28 March Ocado will publish its first quarter trading statement which is expected to have an impact on the company’s share price which since mid-March managed to hold marginally above the minor psychological 400p mark.
Failure at the mid-March 403p low on a daily chart closing basis would push the share’s near 15-year October 2022 low at 380.3p to the fore, below which sits the June 2017 high at 340p.

Ocado Daily Chart

Ocado daily chart share price Source: Tradingview
Ocado daily chart share price Source: Tradingview

Only a positive surprise and subsequent rise and daily chart close above the mid-March 459.4p high would confirm a minor bottoming formation and could lead to the late November-to-mid-February previous support zone, now because of inverse polarity, resistance zone at 605.6p to 615.2p being reached.

Fundamental analysts seem to be far more bullish, however, with Refinitiv data showing a consensus analyst rating of between ‘buy’ and ‘hold’ for Ocado – 6 strong buy, 5 hold and 5 sell - with the median of estimates suggesting a long-term price target of 740 pence for the share, roughly 68% higher than the current price (as of 27 March 2023).

Eikon: Analyst ratings Source: Eikon
Eikon: Analyst ratings Source: Eikon

IG sentiment data shows that 91% of clients with open positions on the share (as of 27 March 2023) expect the price to rise over the near term, while 9% of clients expect the price to fall whereas trading activity over the last week shows 57% of sells and this month shows 57% of buys.

IG sentiment data Source: IG
IG sentiment data Source: IG

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. 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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