The Ocado Group PLC (LON: OCDO) share price surged 46.91% on rumours that it could be a takeover target for leading global technology companies such as Amazon.com. The rumours triggered renewed investor interest in the company primarily because The Times newspaper broke the story, which is a reputable source.
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The online retailer has struggled ever since most countries reopened their economies following the COVID-19 lockdowns that had boosted its sales as people shopped online, pushing its share price to new all-time highs of 2911p in September 2020 and then again in January 2021.
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Ocado’s share price has been falling since January 2021, with the decline accelerating since 2022 when most countries reopened their economies, and competition increased from high-street brick-and-mortar retailers.
The company has also suffered from the rising cost of living in the UK, which has seen consumers reduce their spending on critical items, including groceries, where many are now looking for discounts when making their daily purchases and are more price sensitive.
Ocado also licenses its grocery technology to other firms that need to set up infrastructure for handling groceries. Still, this segment of its business has been slow since only a few firms need its services. Furthermore, once clients set up the infrastructure, they do not need to do it again.
The online grocery retailer could make an attractive acquisition target for a company like Amazon since it would immediately get a strong foothold in the UK grocery markets. The Times report said that Amazon.com was looking to pay 800p per share, representing a massive premium to yesterday’s closing price.
Victoria Scholar, Interactive Investor’s head of investment, said: “Ocado has fallen out of favour with investors lately, trading down 40% over the past 12 months even after today’s jump, attracting potential opportunistic interest from parties looking to pounce on its depressed share price. It was a stay-at-home stock market winner during the pandemic, with shares surging in 2020; however, the economic reopening ever since has prompted a downward trendline to emerge, with many investors unwinding their holdings.”
*This is not investment advice.
Ocado share price.
The Ocado share price surged 46.91% to trade at 631.50p, from Wednesday’s closing price of 429.85p.
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