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2nd Nov 2020. 10.10am

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Ocado (OCDO) – Market Alert

Ocado hikes full-year profit forecast

As the reality of lockdown II starts to sink in, we’ve seen a rather timely trading update from Ocado this morning.

The online food retailer hiked its full-year profit forecast as consumers migrate to online grocery shopping in record numbers.

Ocado has sold its market-leading warehouse technology to supermarket groups across the works and said it expects adjusted earnings to be more than £60m in the 12 months to the end of November – up from previous guidance of more than £40m.

The Group also announced that it had agreed to buy two US-based robotics companies – San Francisco-based Kindred Systems for $262m and Las Vegas-based Haddington Dynamics for $25m. Both businesses develop robots used in picking and packing online orders and the acquisitions are expected to boost full-year revenues in its next financial year by about £30m but have a “small” hit on earnings.

Fundamentals

Ocado’s position as a tech innovator with an aggressive long-term growth strategy means the firm is loss making. And whilst the group has delivered headline revenue growth for the last seven years, losses have widened due to increased investment in logistics and robotics technology.  

Technicals

Ocado’s has established a powerful long-term uptrend since the first lockdown in March.

After hitting highs of £29 in September, the shares have undergone a steady retracement – taking prices back down into a key area of trend support.

Today’s price action following the trading update has seen the shares gap higher at the open and break above the descending retracement line. Ocado now look well-positioned to resume their long-term uptrend.

OCDO Daily Candle Chart

OCDO Daily Candle Chart

Disclaimer:

This research is prepared for general information only and should not be construed as any form of investment advice.