Hargreaves Lansdown argues that Ocado’s (LON:OCDO) ‘lofty valuation’ means that it needs to start delivering on profits, Citywire reports. The comments came after the blue-chip online grocer, whose shares have spiked more than 200 percent over the past year, updated investors on its third-quarter performance yesterday, revealing a rise in revenue.
Investors cheered the group’s results, sending Ocado’s share price 0.79 percent higher at 919.80p in the previous session. The shares outperformed the broader UK market, with the benchmark FTSE 100 index closing little changed yesterday, giving up 1.87 percent to end the session 0.03 percent lower at 7,300.23, as investors digested the latest US tariffs on imports from China.
HL weighs in on Ocado
Citywire quoted Hargreaves Lansdown’s analyst Laith Khalaf as weighing in on Ocado yesterday, noting that despite confidence from a flurry of international deals, running its distribution centres ‘doesn’t come cheap’ and opening its fourth UK facility this year will ‘eat into profits’.
“The market won’t mind that too much because it both boosts Ocado’s UK capacity and acts as a shop window for potential overseas partners,” the analyst continued, adding, however, that given the online grocer’s ‘lofty valuation,’ it needed “to deliver on profits at some point, but in its current expansion phase, shareholders will cut the company considerable slack if it’s using its resources to boost its global footprint”.
The FTSE 100 group announced yesterday that its retail revenue had grown 11.5 percent to £348.6 million in the 13 weeks to September 2, as the online grocer benefitted from new capacity.
Other analysts on group
Numis Securities and Peel Hunt both reaffirmed Ocado as a ‘buy’ yesterday, without specifying a price target on the shares. According to MarketBeat, the online grocer currently has a consensus ‘hold’ rating and an average price target of 558.43p.