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The Ocado (LSE: OCDO) share price has jumped 4.1% today and as an investor I should be pleased. It’s nibbled away at a small proportion of my losses.
Now I’m just down just 22%, but I shouldn’t grumble. Investors who bought the FTSE 250 group at its peak in February 2021, when the shares hit 2,808p, will be down a thumping 88% at today’s 323p.
Ocado was once hailed as the UK’s big tech hope, selling its cutting-edge grocery warehouse technology to the world. It hasn’t happened yet.
Could this be a FTSE 250 winner one day?
Ocado shares continue to slide having plummeted 40% over the last year. I can’t be the only investor asking whether they’ll ever amount to more than a hill of beans.
It’s yet to turn a regular profit and is at least five years away from doing so. While we wait, the board continues to pour money into developing its technology, but the number of overseas grocers adopting its robotic tech warehouses seems to have stalled.
There are glimmers of hope. In its recent Q4 update, published on 14 January, Ocado Retail, the grocery joint venture between Ocado Group and M&S, reported a 17.5% increase in retail revenue to £716m. Weekly orders hit 500,000 for the first time at the end of November.
The shares jumped on the day but as is so often the case with Ocado, couldn’t hold onto their gains. It’s the same every time some good news sneaks out. The shares will probably give up today’s loss tomorrow.
Whenever interest rates fall, investor interest is briefly revived, as lower rates reduce borrowing costs. The launch of a new grocery fulfilment warehouse or success in Ocado’s retail operations can provide a temporary boost. It never lasts though.
Hope springs eternal and I continue to hold onto my shares. Maybe that’s simply reluctance to admit I got it wrong.
Am I being too down on this stock?
Yet there are some positives. Here are three:
Innovative technology. Ocado’s cutting-edge robotic warehouses and fulfilment solutions give it a real technological edge. With luck, this could attract more partnerships and clients in the future. The potential market is huge.
Recent revenue growth: A record Christmas indicates that Ocado Retail’s strategies may be gaining traction.
Market expansion opportunities: As online grocery shopping expands globally, Ocado could tap into new markets and expand its customer base.
There are plenty of negatives too. Here’s three of those:
Profitability. Continued investments in technology development may push the break-even point even further down the line.
Stagnant overseas partnerships. The anticipated growth in international clients adopting Ocado’s technology has not materialised, raising questions about the scalability of its business model and likely return on its tech investment.
Share price volatility. Its reputation as a FTSE falling knife may deter potential new investors.
As I’ve discovered to my cost, just because a stock has fallen sharply, doesn’t mean it can’t fall again, and again. I wouldn’t recommend investors consider Ocado shares today.
One day, they could add up a mountain beans. But we’re likely to be served a lake of thin gruel while we wait.
