The shares of Ocado Group PLC (GB: OCDO) have performed badly over the last year with a 60% downfall – although some analysts hold out hope that the online grocery sector could boom in coming years.
The grocer has frustrated investors in recent years, having only achieved a pre-tax profit three times in the past 22 years
Rising inflation is further hurting the company’s profits and margins and investors will have to wait a little longer to see a turnaround here.
Ocado Group is an online grocery retailer in the UK, and also licenses its grocery technology to other companies.
The funding needs
The company recently raised £578 million via equity placing and £300 million from a new credit facility from a group of banks. The company sold its shares to existing and new shareholders along with retail investors and Ocado management.
This funding ensures sufficient liquidity for the company to fulfil its prior commitments an survive in an uncertain trading environment.
In the words of William Woods, an analyst at Bernstein, “although existing investors would see their interests diluted by the new equity, the fundraising removed an overhang from the share price,”
View from the city
According to TipRanks’ analyst rating consensus, the company has a Hold rating based on six Hold, two Buy, and one Sell recommendations.
The average Ocado price target is 1106.64p which implies upside potential of 43%. The analyst price target has a high and low forecast of 1582.31p and 894.59p, respectively.
Ocado is waiting to see sustainable growth and the short-term prospects aren’t favorable. The stock is not likely to rebound in the near term.