Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Ocado shares could recover as technological investment increases

The Ocado share price is down 55% over the past year to 1,220p today. While the pandemic winner has now lost all its covid-19 gains, its long-term investments could spark an eventual recovery.

ocado Source: Bloomberg

The Ocado (LON: OCDO) share price was one of the big winners of the covid-19 pandemic, rising to twin highs of 2,819p in September 2020 and 2,808p in February last year.

But it’s been on a downward trajectory over the past year, and Ocado shares are now exchanging hands for the same price as it was pre-pandemic. While the online grocery retailer has more customers and a stronger business proposition than two years ago, increasing technological investment without a timeframe for returns is weighing on investor sentiment.

Ocado share price: FY21 results

At first glance, yesterday’s results were broadly positive. Revenue rose 7.2% year-over-year to £2.5 billion, ‘with all business segments growing.’ Retail sales rose 4.6% to £2.3 billion and were up 41.5% compared to pre-pandemic levels. The group’s EBITDA of £61 million compares favourably to £73.1 million of the prior year, as ‘investments in technology capability and Group support functions offset higher EBITDA in UK Solutions & Logistics and Ocado Retail.’ And it maintained cash liquidity of £1.5 billion, with net debt of only £359.8 million.

CEO Tim Steiner commented ‘the past year has further reinforced that demand for online grocery is here to stay… to truly win here food retailers need to deliver the best offer with the best economics across all customer missions.’

And the company is growing, albeit slower than in 2020. Customer numbers have risen 22.4% to 832,000, while order numbers increased 11.9% to 357,000. However, this was partially offset by basket spend, which fell 5.8% to £129. But Ocado believes growth could have been stronger had it not been ‘constrained…by the ongoing tight labour market in the UK’ which has seen a growing HGV driver shortage. And the company also pointed the finger at a fire in its Erith distribution centre which eventually cost £35 million.

But it opened five new Customer Fulfilment Centres (CFCs), including two in the US, and expects to have 22 by the end of the year. And encouragingly, 70% of its Ocado Smart Platform partners are now live.

Video poster image

Technological investment, no timeframe

However, the devil is in the detail. Ocado posted a loss before tax of £176.9 million, reflecting ‘increased investment in our Solutions business, particularly the increasing roll out of Ocado Smart Platform.’ By comparison, it lost only £52.3 million the year before.

And the grocer expects capital expenditure to rise to £800 million this year to fund further technological development. Moreover, it’s already invested £20 million in two autonomous vehicle software specialists, Oxybotica and Wayve, which design vehicles ‘for use inside CFCs, to last-mile deliveries; and even kerb-to-kitchen robots.’ But first prototypes could take up to two years.

And while it works closely with Marks & Spencer's and Morrisons, it hasn’t signed any further supermarket deals. The grocer has informed investors it remains ‘in conversation with a number of retailers and continue to target further Solutions deals,’ but does not yet have additional contracts to utilise its 40% expanded capacity.

The company professes that its ‘technology can now ramp up as fast as our partners desire…Bristol, Andover and Purfleet (sites), ramped faster than those sites before it. And Steiner believes the company’s ‘new generation of Ocado technology…represents a transformational leap forward allowing our partners to comprehensively out-compete peers online.’

But Markets.com analyst Neil Wilson believes ‘investors who’ve been in for the long haul are clearly losing patience.’ Russ Mould of AJ Bell thinks ‘investors are getting tired of hanging around for the big earnings breakthrough.’ And STIQ robotics analyst Tom Andersson is concerned that ‘whilst most of these developments looked great, none will be available to customers before the end of 2023… the question remains if these innovations will simply offer gradual increases or a dramatic 20-30% improvement of throughput.’

However, revenue from its tech division rose to £66.6 million from £16.6 million the year before. Steiner argues that recent breakthroughs are a ‘game changer…that could ‘shatter the existing rules of the industry.’

And Ocado shares could soar if this technological investment pays off. But without a clear timeframe, and amid thousands of other opportunities in a financially tight environment, the pressure to deliver continues to build.

Go short and long with CFDs on 16,000+ shares with Singapore’s No.1 platform.* Learn more about trading shares with us, or open an account to get started today.

*Awarded the Best Online Trading Platform by Influential Brands in 2020.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

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. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access
Learn more

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Tuesday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

<h3>How much does trading cost?</h3>
<h3>Find out about IG</h3>
<h3>Plan your trading</h3>

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.