Price Analysis / Stocks · August 8, 2022

Ocado Shares in Turmoil: Dip-Buying Time?

Briefly –

  • Ocado’s share price has lost more than 70% since its ATH.
  • Market participants remain concerned about the firm’s recurrent losses.
  • The company sees slowed growth in its vital sectors.

Ocado (LON: OCDO) share remained under massive downward pressure today (Monday) as market players stay concerned about the company’s perennial losses.

OCDO has plummeted to the 867p low, below the previous week’s 987p high. It hovered around 70% from the 2021 all-time high. Meanwhile, the firm’s market capitalization has deteriorated to approximately 7.16 billion pounds.

Slow Growth Plus Profitability Absence

Ocado is a top British firm offering e-commerce services internationally and nationally. The company boasts a joint project with Marks & Spencer, the leading retailer with a market cap of more than 2.7B pounds in the United Kingdom.

Ocado’s technology sector offers retailers in top nations warehousing services. Some of the renowned clients utilizing its solutions are Polskar and Kroger. Meanwhile, Ocado’s share price has crashed within the last few months, and three reasons contributed to the slump.

First and foremost, investors trust the firm isn’t a growth stock anymore. For instance, its H1 revenue declined by 4.4% to 1.26 billion pounds. Remember, markets have perceived Ocado as a high-growth technology company in the past.

Secondly, this year has seen troubles with sales volume due to surging inflation. The United Kingdom’s consumer prices increased by 9.4% in June 2022, a decade-high.

Meanwhile, leading economies such as Germany and the United States noted similar trends. Consequently, the company sees concerns about the cost of operation and demand.

Thirdly, Ocado proved a recurrent loss-maker. The firm has spent massive cash for over a decade and realized substantial losses. For instance, the company’s loss for the 2021 H1 stood at above 204 million pounds.

Unfortunately, the management continues to invest. It has raised 875 million pounds in 2022 for business expansion. It received 578 million pounds from capital (placing), whereas the remaining came from debts. Thus, investors remain worried about Ocado’s profitability plans.

Ocado Share Price Prediction

According to the daily chart, OCDO share price maintained massive bearishness within the last few months. However, it recently hovered inside crucial support and resistance at 709p and 960p. Also, its stays slightly beyond the 25- and 50-day MAs. Thus, Ocado maintained a neutral bias with a bearish stance. Persistence by bears would see the stock retesting the channel’s lower side at 709p.