Ocado shares boosted following Morgan Stanley upgrade

Following a bearish June, the Ocado share price is on the rise once more, after an upgrade by the US investment bank Morgan Stanley, which recently changed its price outlook from 'equal weight' to 'overweight'. What next?

  • Ocado shares jumped 1.6% to £19.50 when markets opened on 24 June
  • The Ocado share price has fallen 36% since September
  • Morgan Stanley stated Ocado share price is at ‘an attractive entry point’
  • Ocado has been lifted by other supermarket stocks
  • Ready to trade the Ocado share price? Open an account today

Why is the Ocado share price rising?

The UK grocery and distribution giant Ocado saw its share price rise 1.2% to £19.74 when markets opened on 24 June, continuing a week-long bull streak that has lifted its share price by more than 3% since the week beginning 21 June.

Much of this boost can be attributed to the US multinational investment bank Morgan Stanley, which announced on 21 June that it would be upgrading its price outlook for Ocado, from ‘equal’ to ‘overweight’.

It also revised its price target upwards to £28.25, from a previous target of £28.13. Morgan Stanley described the total available market (TAM) for Ocado as ‘compelling’ and said that its current price ‘represents an attractive entry point’.

Is Ocado out of the woods?

This much-needed boost for the Ocado share price comes after a months-long bearish streak, with shares losing 36% of their overall value since September. It was the subsequent sell-off of Ocado shares over the course of the past few months that prompted Morgan Stanley to upgrade its outlook, as it believes Ocado is no longer overpriced and that ‘near-term risks are priced in’.

Ocado has also been lifted this week by positive developments in the UK grocery sector. On 21 June it was revealed that a US private equity firm had tried and failed to initiate a £5.5 billion takeover of Morrisons. This sent share prices of all major grocery retailers soaring, as talk of bidding wars began to circulate.

That being said, Ocado still has its own troubles to contend with. For one, the company is wrangled in a complicated legal battle with the Norwegian distribution company AutoStore over the IP rights of its logistic technology. This dispute has now attracted the involvement of the US International Trade Commission. Furthermore, despite profits in recent years, the company has racked up hundreds of millions of pounds in losses over the decade.

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