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magazineOcado shares gain on global expansion plans
Ocado (OCDO) £12.52
Gain to date: 5.5%
Original entry point: Buy at £11.87, 25 July 2019
Shares in online retailer Ocado (OCDO) rose this week despite revenue for the year to 1 December just meeting estimates and losses widening further as it continues to invest overseas.
Sales in the UK Retail division grew by more than 10% while the Solutions & Logistics business grew turnover by 7.8%. However pre-tax losses ballooned to £214.5m from £44.4m after accounting for the costs of a fire at its Andover warehouse and heavy investment in its international business.
Ocado signed up more overseas retailers to its Smart Platform last year and plans to open two state-of-the-art warehouses, in France and Canada, in the next six months. Two more openings are planned in Australia within the next three years and more openings are scheduled in Japan in coming years.
For shareholders this means no profit for the foreseeable future and potentially further dilution as the firm raises more capital to fund growth.
However analysts at Morningstar estimate the global online grocery market to be worth over £700bn within two decades and they also believe Ocado’s Smart Platform is ‘years ahead of the competition’ so the opportunity is huge provided the company continues to execute well.
SHARES SAYS: We remain buyers for now.
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