Berenberg cuts Ocado to ‘hold’, says high expectations are built in

Berenberg downgraded Ocado shares to ‘hold’ from ‘buy’ on Friday and cut the price target to 2,390p from 2,925p as it said it’s a great company but expectations are high.

"We believe that Ocado’s ecosystem of grocery e-commerce solutions is best-in-class, that it will continue to sign more deals with both existing and new partners, and that it is one of the stand-out long-term winners in the UK consumer and technology space," Berenberg said.

However, it noted that Ocado’s value has moved a long way in the past 18 months, up around 80% since it upgraded the shares to ‘buy’ in 2019.

"We are cognisant of the high expectations now built into the name, and with travel restrictions delaying new partnerships over the near term, this may drag on sentiment," the bank said. "Furthermore, the shares may be sensitive to the normalisation of grocery demand post-Covid-19, thereby making debate for the rest of 2021 less one-sided to the upside."

As a result, the risk/reward is currently less attractive than for other names in Berenberg’s UK consumer coverage. The bank highlighted ASOS for growth, B&M European Value Retail for strong returns and Pets at Home as a post Covid-19 winner.

At 1040 GMT, Ocado shares were down 0.7% at 2,066.20p.