It’s been another rollercoaster week in the life of Ocado, as the under-fire online supermarket suffered a share price plunge on Monday on a broker downgrade – only to bounce straight back the next day on an earnings upgrade.
First came the bad news, as influential broker Bernstein downgraded the stock to ‘underperform’ this week.
Analyst Bruno Monteyne wrote: “The ‘jam tomorrow’ story is now less jam, more tomorrow – CFCs have been paused, refinancing is looming, Kroger is stuck, and they will need more cash.”
He suggested Ocado would need to “seriously consider its options” in terms of whether it was right to be a public equity, and what it could do to reduce short-term cash burn.
The stock price subsequently plunged by 10.4% to 340.4p ahead of its half-year results the following day.
However, those interim results were much better received. Ocado almost halved its losses and increased revenue by double-digits, prompting CEO Tim Steiner to hail the resumption of the “global channel shift to online”.
Overall revenues in the six months to 2 June grew 12.6% to £1.54bn. Its key ‘technology solutions’ arm was up 21.8% to £241.4m and its retail JV with M&S rose 11.3% to £1.31bn, as customer numbers grew and basket sizes remained stable.
Crucially, a notable improvement in the profitability of its technology arm pushed up adjusted EBITDA from £16.6m to £71.2m – an improvement of £54.6m.
Technology solutions generated adjusted EBITDA of £35m, up from £5.9m, while retail moved to an adjusted EBITDA of £20.7m from a £2.5m loss last year due to stronger trading.
The results meant its statutory loss before tax fell to £153.9m from £289.5m.
The stronger bottom-line performance prompted an upgrade in the forecast profitability of its tech arm. It is expected to see revenue growth of 15%-20% and mid-teens percentage adjusted EBITDA margin for the year, up from previous guidance of ‘greater than 10%’.
The shares rebounded back over 400p before settling back to 360.5p on Tuesday – a 5.9% rise. They had risen back above Monday’s opening price to 385.4p by Thursday lunchtime.
Broker Peel Hunt said the better than forecast results suggested “the macro appears to be normalising and online doing well again”. It added: “Ocado has tightened its cash flow positivity guidance, now saying it has a clear roadmap for the group to turn cash flow positive during 2026, and this includes any increases in interest costs associated with any refinancing.”
AJ Bell welcomed the results, but cautioned: “Ocado needs to make a habit of regularly producing results like these if it is to properly win back the market’s favour. That may not be easy. Sustained improvements are the only ways to make the critics put away the knives they’ve been sharpening for some time… Ocado cannot sit comfortably until it wins more contracts and builds scale.”
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