The Ocado share price has opened lower in early trade this morning, after the online grocer posted a solid set of first half-numbers, with revenue increasing by 23.2% to £1.08bn.
Retail revenue rose by 27.2% to £1.02bn, and fees from its international business jumped by 58% to £73.7m. The opening of operations in Paris and Toronto boosted the overseas business. The expansion of the group came at a cost, and that was a contributing factor behind the 36% fall in EBITDA to £19.8m. The firm is in better shape as it swung from a net debt position of £283.4m to a cash balance of £196.2m.
In terms of the guidance, there were no material changes to the previous forecast. The company anticipates a positive outlook for online groceries, but the guidance for retail revenue remains suspended on account of the unpredictable nature of the coronavirus pandemic. Ocado is planning on capital expenditure of roughly £600m this year, so it is clearly optimistic about its prospects.
Ocado share price hits June high
Ocado issued a positive second-quarter update in early May. The group said that retail revenue growth was 40.4%, a big improvement on the 10.3% posted in the first quarter. The lockdown acted as a double victory for the firm, as grocery stores across the board experienced a jump in activity, as some people decided to stockpile items. The fact the lockdown was driven by health concerns encouraged some people to go down the route of online shopping. The update in May pushed the Ocado share price higher, and it went to a record high in June.
Ocado has not been without its issues, for example, the fire at their operation in Andover was a big factor in the widening of last year’s loss. The full-year, pre-tax loss was £214.5m, and that was a big increase on the £44m loss from the previous year. The fire wasn’t blamed for everything, as the loss at its international solutions unit increased too. Revenue increased by 9.9% to £1.75bn as it popularity increased at home and abroad.
Global partners join online specialist
The group muddled along for years as it tried to compete with the online division of well-established players such as Tesco. Like any relatively new business, it took its time working on its craft. Ocado tried unsuccessfully to strike up international partnerships for years, but then in relatively quick succession, it brokered deals in France, Canada, the US, Australia and more recently Japan.
It seems to me the more partners Ocado racked up, the easier it was for them to strike up further partnerships. The firm has marked itself out as a specialist in online food delivery, and given the enormous shift to e-commerce in the past few months, Ocado should be in a good position to sign up more partners.
Ocado share price soars 60% in 2020
The Ocado share price is up 60% year-to-date, which has driven up its market capitalisation to more than £15bn. In comparison, the collective market capitalisation of Sainsbury’s, Morrisons and Marks & Spencer is roughly £11bn. The lofty valuation of Ocado has prompted a few raised eyebrows, so the company has high expectations to live up to.
The stock has been in an uptrend since mid-March and while it holds above its 50-day moving average at 2,001p, the bullish trend should continue.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets erbjuder sin tjänst som ”execution only”. Detta material (antingen uttryckt eller inte) är endast för allmän information och tar inte hänsyn till dina personliga omständigheter eller mål. Ingenting i detta material är (eller bör anses vara) finansiella, investeringar eller andra råd som beroende bör läggas på. Inget yttrande i materialet utgör en rekommendation från CMC Markets eller författaren om en viss investering, säkerhet, transaktion eller investeringsstrategi. Detta innehåll har inte skapats i enlighet med de regler som finns för oberoende investeringsrådgivning. Även om vi inte uttryckligen hindras från att handla innan vi har tillhandhållit detta innehåll försöker vi inte dra nytta av det innan det sprids.