After hitting highs for the year in January, the Ocado share price has steadied recently. Will the economic reopening help or hinder the delivery specialist as it reveals its half-year results.
Is the Ocado share price still delivering?
At the start of February, Ocado’s share price almost put it within touching distance of Tesco, the UK’s number one food retailer, despite full-year revenues that were a mere fraction of Tesco's at £2.33bn. Since then, the shares have undergone a bit of a reassessment, falling around 30%.
The declines appear to have coincided with the expectation of the easing of restrictions and steady reopening of the UK economy. As people become less reliant on home deliveries for their groceries, and gain the confidence to return to the supermarkets, the Ocado share price could face a challenge as business levels out.
Ocado continues tech acquisitions
The company has continued to invest in its automation technology, paying a combined £287m to acquire Kindred Systems and Haddington Dynamics at the end of last year. Both companies specialise in robotics manufacture, and Tim Steiner, Ocado Group CEO, believes they’ll enhance Ocado’s picking and packing capabilities: “The bringing together of these three great companies to help solve this challenge is really, really exciting”. These types of deal and capex are part of the company’s strategy to streamline the picking functions in its automated fulfilment centres, to improve efficiencies across the business.
In April, Ocado took this further investing £10m in Oxbotica, a company that specialises in software for driverless vehicles, which would be used in and around its warehouses and distribution sites. With logistics constituting a chunk of operating costs, the company will be looking for further cost savings through automation. Alex Harvey, Ocado’s chief of advanced technology, said: “we are excited to develop a wide range of autonomous solutions that truly have the potential to transform both our and our partners’ operations.”
This investment in new technology is a key plank in the company’s desire to optimise its growth potential, as it continues to sign new deals and gets the benefit from the deals it signed with the likes of Marks & Spencer. The £750m tie-up with M&S led to the delivery specialist's busiest ever day for orders in September 2020, news which saw the Ocado share price rise 10.7%.
What’s next for the Ocado share price?
The main concern for shareholders is the gap between its current valuation and its prospects for future revenue growth. However, given recent declines in the share price this is less of a problem than it was back in February. Tuesday’s half-year numbers will be an early indication of how well the business is shaping up in this current fiscal year.
Ocado will release its half-year results on Tuesday 6 July. How will the Ocado share price react?
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