Stock Watch

Ocado share price tipped to rise on raised guidance

CMC Markets

The Ocado share price is likely to push higher today as the full-year earnings guidance was raised again.

The delivery specialist now expects full-year EBITDA to be more than £70m. In early November it announced that profit would be at least £60m, a big increase from the old forecast of around £40m. This morning’s trading statement covered the fourth quarter and retail revenue grew by 35%. Ocado confirmed that customers continue to embrace the full Marks & Spencer range of products after their joint venture was launched in September. Ocado will open three new warehouses in 2021 and that will boost capacity by 40%, a huge move by industry standards. 

Ocado share price boosted by rise in home deliveries

Ocado has been one of the few companies to benefit greatly from the pandemic, but it hasn't always been smooth sailing. The online grocery spent a lot of time and money honing its skills, taking several years to break out of the UK and gain exposure overseas. In late 2017, it entered into a joint venture with Groupe Casino of France, before signing up for ventures in Canada, the US, Australia, Japan, Spain and Sweden.

In recent years, consumers have gradually embraced e-commerce. The Covid-19 pandemic turbocharged the drive to online shopping, testing the limits of Ocado's capacity. The prospect of vaccines should see demand for Ocado fade a little, but a certain chunk of the new customers they signed up amid the pandemic will probably continue to shop with them. The firm should find it easier to broker new deals with other supermarkets around the globe as everyone now realises the importance of e-commerce.      

A year of ups and downs for the Ocado share price      

The Ocado share price had a reasonably subdued start to 2020. It moved higher at the beginning of the year and in January it hit it its highest level since late November 2019, but it was already sliding before the pandemic erupted. When panic selling set in, the stock dropped to an 11-month low in March. It did rebound, and went on a bullish run until late September, as the Ocado share price rallied over 190%. Since the highs of late September, it has pulled back over 20%, as traders have been rotating out of online related stocks and into traditional companies like airlines and high street retailers.

The Ocado share price has been trading sideways recently but while it holds above the 200-day moving average at 2,048p, the broader uptrend should continue. A rally from here could run into resistance at 2,647p, and a break above that metric should put 3,000p on the radar.