logo-loader

HSBC cuts Ocado as it thinks while risk has shifted to customers after recent deals, they have not been completely eliminated

Published: 07:53 11 Apr 2019 EDT

Ocado vans
They estimate that a further 40 customer fulfilment centres (CFCs) are required to justify Ocado’s current share price, in addition to the 25 already agreed

HSBC has cut its rating for Ocado PLC (LON:OCDO) to ‘hold’ from ‘buy’ as it believes that while the risks for the technology-focused online grocery has shifted to its customers after recent key deals, they think they have not been completely eliminated.

After recent gains by the now FTSE 100-listed firm’s stock following recent positive newsflow, HSBC raised its target price for Ocado to 900p from 750p, albeit with the shares currently trading at 1,391.50p, down 3% on Wednesday’s close.

READ: Ocado and M&S confirm talks regarding joint venture

In a note to clients, the global bank’s analyst said, while the group has lowered its direct exposure to the Grocery Home Delivery model through its recently announced joint venture with Marks & Spencer PLC (LON:MKS), it has not changed the fundamental economics of Grocery Home Delivery, which they believe are challenged.

The analysts added: “It has simply pushed this back as investors will now wait for Ocado’s customers to determine whether the model works or not. Our analysis suggests not.”

They estimate that a further 40 customer fulfilment centres (CFCs) are required to justify Ocado’s current share price, in addition to the 25 already agreed.

“Longer term, we believe Ocado will only succeed if it can enable its customers to succeed too and we believe there is risk here given the challenging economics of Grocery Home Delivery,” the analysts concluded.

ARway.ai announces multiple new SaaS developer contracts in both the United...

ARway.ai (CSE:ARWY, OTCQB:ARWYF) Chief Executive Officer Evan Gappelberg joined Steve Darling from Proactive to announce multiple new SaaS developer sign-ups for its augmented reality experience platform, focusing on AR indoor navigation. These partnerships represent significant milestones in...

20 minutes ago