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Ocado share price strong ahead of full-year results

After a barnstorming 2020, can Ocado keep up the flow of good news to maintain the gains in its shares?

Ocado Source: Bloomberg

When are Ocado’s earnings published?

Ocado publishes earnings on 9 February, covering its full year.

Ocado earnings – what does the City expect?

Ocado is expected to report a 33.5% rise in revenues, to £2.35 billion, while earnings are expected to fall 22.8% to 19.9p per share.

It has been a good year for Ocado, thanks to the boom in online shopping during the Covid-19 pandemic. This week’s results will feature this performance, but investors will be right to ask about what comes next. The shares saw three profit upgrades over the year, and investors have been keen to back the group in its efforts to expand, convinced that the firm’s technology division offers the path to further global riches as other companies like Kroger utilise Ocado’s expertise.

Ocado’s appeal lies in the fact it is much more than a supermarket. It is selling technology around the globe, and thus is one of the UK’s only real big tech names. While the FTSE 100 is mostly made up of staid miners, banks and other supermarkets, Ocado provides a touch of glamour and growth that resembles the big winners in the US such as Amazon. Like those big-name tech stocks however, it continues to burn through cash. Investors seem content to back it for now, happy with the promise of global growth.

How to trade Ocado’s earnings

Ocado has missed earnings and revenue estimates in five of its last eight reports. Of the 19 analysts covering the shares, six have ‘ buys’, with six ‘holds’ and seven ‘sells’. The current median target price is £27.72, a 38% premium to the current price.

The average move on results day is 4.3%, with current options pricing pointing to a 3.7% move. First-half results in July saw the shares move 2.7%.

Ocado share price – technical analysis

After leaping from March, the price hit an all-time high in September just above £29. This marked a gain of 190% from the mid-March lows, but was followed up by a decline of 25% that only really ended in mid-December. The broader FTSE 100 rallied from late October, but Ocado shares struggled to break out of the £21.00 to £23.50 range until mid-December.

Ocado chart Source: ProRealTime
Ocado chart Source: ProRealTime

Since then we have seen a strong rally, the price moving back above the 50-day (£24.34) and 100-day (£24.56) moving averages (MAs). Unsurprisingly, momentum has stalled as earnings approach and daily stochastics have moved down while the moving average convergence divergence (MACD) indicator is poised to roll over after its strong bounce over the past eight weeks.

Ocado looks for more growth

The future looks bright for Ocado, and so far there is no shortage of investors willing to part with their money for a share in the global expansion of this UK star. The supposed rotation from growth stocks to value names does not appear to have had much effect on Ocado, but given its current lofty valuation Ocado needs to keep producing new contracts for its technology, or investors may begin to question the firm’s progress.

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