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Ocado share price: what to expect from its next update?

Ocado’s third quarter trading update is scheduled for Tuesday 14 September. Can Ocado consolidate its position after the lockdown business boom?

Ocado Source: Bloomberg

When does Ocado report its next update?

Online supermarket and logistics company Ocado PLC (OCDO) reports a third quarter (Q3) trading update on Tuesday 14 September. The update will be released at 7am UK time through the company website and on the London Stock Exchange (LSE).

What are traders expecting?

Having experienced a considerable uptick in its business, during the lockdown, Ocado must now find ways of consolidating its position. With the opening of the economy, it is widely expected that the business will see a drop in demand as shoppers return, in part, to the high street. But what anaysts will be looking for, is an update on how the adoption of new technologies can further reduce costs through warehouse automation.

At the half year, Ocado chief executive officer (CEO), Tim Steiner, acknowledged that a shift in retail had occurred during the last 18 months:

'As we head towards a post Covid-19 pandemic future, it is increasingly clear that the landscape for grocery worldwide has changed, for good. Over the last eighteen months, we have shown that the Ocado model works even in the most challenging and fluid of environments.'

It will be important that we hear more about the changing landscape and how Steiner, and his team, feel about the impending full-year (FY).

Ocado a retail darling chart Source: IG charts
Ocado a retail darling chart Source: IG charts

This chart goes back to the early days of OCDO in 2015 and the context of the gains can clearly be seen. The big moves up in shares, over the last three years, have all be as a result of the progress of Ocado Solutions establishing partnerships around the world. These include the likes of Kroger, in the US, Coles in Australia, Casino in France and Alcampo in Spain, amongst others. Ocado Solutions enables these businesses to reduce their costs and this all helps OCDO’s network expand.

During the Covid-19 pandemic, despite the recent weakening, the highlight was the partnership established here in the UK with Marks & Spencer. This remains a good source of income for OCDO.

Ocado how to trade the update chart Source: IG charts
Ocado how to trade the update chart Source: IG charts

Shares look to be on the way down, closing in on the £17.70 support level. A short trade seems to be supported by the recent drop in the moving average convergence/divergence (MACD) indicator at the bottom of the chart. This indicates that momentum is picking up on the short side. If you are short, going into the release, you should protect your trade with a stop loss above recent price action, about £21.50.

However, should you believe that Ocado is preparing a positive release, that would see a recovery in its shares and eat into the recent losses, you would open a long trade with a stop-loss below the £17.70 support. Because this is a trading update, there will be nothing substantial that we should expect from the company’s profit and loss, rather an indication as to whether the business is on track to meet, beat or fall short of prior estimates.

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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