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Will the latest UK lockdown keep Ocado shares strong in Q1?

The Ocado share price saw much speculation in the lead up to December 2020. Increased demand for online retail technology means Ocado shares have enjoyed a strong start to 2021. With another UK lockdown analysts remain bullish.

  • Can the Ocado share price continue its bullish lockdown trend?
  • Analysts adjust price targets as shares gain momentum
  • But could long-term profitability derail the Ocado share price rise?
  • Want to trade Ocado shares? Open an account to get started

IG technical analysis spotted an upward trend for the Ocado (OCDO:L) share price in late November. Following a sharp drop in October, shares rallied and found support at 2,160p. The prediction then was that a move towards 2,400p could trigger a breakout to a new upside. Although Ocado shares haven’t managed to hold any momentum at that price, they are trending in that direction.

Can Ocado shares continue their strong start to 2021?

Trading opened at 2,360p on 5 January. Within the hour, the retail technology company achieved an early peak of 2,435p. That position was quickly lost, but given the recent bullish trend, analysts are looking towards higher price targets. Berenberg Bank recently increased its Ocado share price target from 2,430p to 2,530p. Peel Hunt and Bank of America have both issued buy ratings, while Citigroup is currently the most bullish with a 2,900p target.

By these measures, IG’s technical analysis in December is bearing fruit. Progress has been steady for Ocado shares and, so far in 2021, the company is showing its fundamental strength. The question now is how will Ocado perform in light of the UK’s latest lockdown? With Prime Minister Boris Johnson issuing stay at home orders in England, and his Scottish counterpart doing the same, online deliveries are likely to surge in the coming weeks.

Long-term profitability may hurt future Ocado share price targets

Equity analyst Robert Stephens believes this could play to Ocado’s advantage. Although he sees long-term profitability as a potential issue, he believes Ocado shares will outperform the FTSE 100 in 2021, as they did last year.

Technology agreements in the US and Australia will help but, for Stephens, it’s Ocado’s status as a ‘pure-play digital retailer’ that’s keeping it ahead of Tesco, Sainsbury’s and Morrisons. In his opinion, being able to ‘operate with less disruption’ during lockdowns will keep Ocado on an upward trajectory.

Will Ocado successfully capitalise on the latest UK lockdown?

Beyond the latest lockdown, the outlook is less clear. Retail may have changed for good, which, if true, could be positive for Ocado. However, analysts are cautious given that the company’s bottom line is still in the red. This may change, but it remains a concern. In spite of this, the Ocado share price remains bullish. The question now is whether it can capitalise on the latest disruption to normal life in the UK and find support at a new price in the coming weeks.

How to trade Ocado shares: long or short

What are your thoughts on the stock at current price levels: are you bullish or bearish?

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This information has been prepared by IG, a trading name of IG Markets Limited. 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. See full non-independent research disclaimer and quarterly summary.

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