Shares in M&S-linked grocer Ocado have tumbled after being branded as ‘underperforming’ only a few weeks after being demoted from the FTSE 100.
Ocado’s share price has been slashed by 12 per cent today following its rating being downgraded by Bernstein.
The company has been moved from ‘outperform’ to ‘underperform’ while Bernstein slashed its target price from 1,000p to 250p, “having been one of the last bulls standing”.
“We have long been believers in the strength of Ocado’s technology, the CFC economics and the growth of online grocery, supporting their pipeline,” it said.
“However, online has not bounced back post-pandemic and CFCs have not ramped up as expected.”
Demand for online shopping has weakened after the pandemic, and many retailers prefer to fulfill orders in-house.
Partnerships have been paused – like Kroger and Sobey’s – or delayed (Coles). Ocado is also embroiled in a legal dispute with Marks and Spencer – which owns half of Ocado.com – over payments related to Ocado missing contractual targets.
Bernstein argued that Ocado will need at least another £500m of capital on top of refinancing by 2027.
The stock is the third-most shorted in London, with nearly seven per cent of its shares on loan to funds who think their value will fall.
It fell out of the FTSE 100 at the end of May after a long tumble in its share price. At its pandemic peak, the online grocer had a market cap of £22m; now it is worth around £3m.
Analyst projections on Ocado vary, according to Bloomberg. The most bullish broker expected the shares to rise almost ninefold from current levels, while the most bearish projected declines of 36 per cent.
Ocado is due to release interim results tomorrow, July 16.
Ocado’s share price call comes after Burberry’s valuation fell by even more this morning after it released a dismal set of results for the first half of the year.