The Ocado Group PLC (LON: OCDO) share price has fallen 23.26% in the week following a significant downgrade from Andrew Glynn, an analyst at BNP Paribas Exane. Andrew is a former bear whose last rating on Ocado was ‘neutral’ before the latest downgrade back to ‘underperform’.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.
The former bear had promoted Ocado stock to ‘neutral’ from ‘underperform’ in June, arguing that the risk-reward setup was more balanced then. However, the analyst now sees that the current Ocado stock price is out of balance, and there is a greater risk the stock will fall back after its recent gains.
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YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY
Glynn noted that Ocado’s share price had doubled since the investment firm upped its rating on the stock from ‘underperform’ to ‘neutral’. The analyst also cited the departure of the Ocado Solutions CEO, which could affect the performance of the crucial business unit.
Luke Jensen, a former executive director and CEO of Ocado Solutions, recently left the firm. Ocado Solutions is the division tasked with building high-tech automated warehouses for international clients. After his departure, John Martin, a non-executive director, took up Jensen’s role.
The downgrade came just days after Ocado had reported excellent results from its Ocado Retail joint venture with Marks & Spencer, where its retail sales were up 7.2% during Q3 2023. The company’s upbeat numbers were driven by its ‘Perfect Execution Programme’ and the ‘Big Price Drop’ campaign in August.
The company also highlighted its discounts and fast delivery times as key reasons why customers chose to shop at Ocado Retail. Hannah Gibson, the CEO of Ocado Retail, noted that Q3 revenues grew much faster than H1 2023 revenues and that there was a “return to positive volume growth in the last month of the quarter”.
Ocado shares were still falling as the company struggled to regain footing following the analyst's downgrade. The drastic reaction to Glynn’s downgrade of Ocado shares indicates that the markets agree with his assessment. To recover from its losing streak, Ocado must prove its fundamentals are robust.
However, I would only consider buying Ocado shares after a significant stock performance shift.
Ocado share price.
The Ocado share price has fallen 23.26% in the past week following the analyst downgrade.
YOUR CAPITAL IS AT RISK. 76% OF RETAIL CFD ACCOUNTS LOSE MONEY.