Ocado share price is melting down: How low can it go?

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Written on Sep 22, 2023

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Ocado stock price continued its bearish trend this week.
Analysts at Exane believe that it can crash by over 40%.
UK retail sales continued falling in August as the cost of living crisis continued.

Ocado (LON: OCDO) share price has had a difficult week as it had its worst daily performance on record. The stock plunged by more than 20% on Thursday and reached its lowest level since July 18th this year. It has plunged by 35.7% from the highest level this month.

Ocado earnings growth

Ocado published encouraging financial results for its retail division. The results showed that the company was doing well. Its revenue rose by 7.2% in the third quarter to over £569 million. The average number of orders per week rose to 381 while the number of active customers rose to over 961k. These results showed that the company’s recovery was taking shape.

The other big Ocado news came on Thursday when Exane decided to slash its rating for the company. In a statement, the company slashed its ratings from neutral to underperform. They also noted that the risk-reward was not favourable. As a result, they believe that the Ocado share price will drop to 390p, which is ~40% below the current level.

The other important news came from the Office of National Statistics (ONS). In a report, the ONS said that the British retail sector is not doing well. Retail sales dropped by 1.4% in August, worse than the expected 1.2% retreat. Core sales also dropped by 1.4% in the same period.

A key hope for the Ocado share price is that the company will be acquired. A few months ago, we wrote that several companies were considering placing a bid for the company. Amazon, the likely buyer, could be interested in the company’s technology assets.

The daily chart shows that the Ocado stock price has been in a strong bearish trend in the past few days. As it crashed on Thursday, the stock plunged below the important support at $713, the lowest level on August 23rd. The shares had formed what looks like a double-top pattern, which is usually a bearish sign.

Ocado share price has dropped below the 100-day and 50-day moving averages. The Relative Strength Index (RSI) is approaching the overbought point at 30. Therefore, the shares will likely continue falling as sellers target the key support at 600p. This forecast is in line with my recent prediction.