Goldman Sachs downgrades Ocado to 'neutral' after outperformance

Goldman Sachs downgraded its stance on Ocado to 'neutral' and removed the stock from its Conviction List following "material" outperformance.

GS noted the share price has risen around 135% since Ocado announced its agreements with France's Casino last November and Canadian food retailer Sobeys in January to provide them with its end-to-end grocery solution, Ocado Smart Platform.

Since being added to the Conviction List in May 2014, the stock is up 79% versus the FTSE World Europe up 20%, the bank said. Since being added to the buy list in October 2013, the stock is up 34% versus the FTSE World Europe up 26, with no upside remaining to Goldman's unchanged 540p 12-month price target.

"While we believe there is a material opportunity for Ocado in the online grocery space, our target price already includes seven further OSP deals to be signed over the next 10 years of a similar size to those two.

"Thus, over the next 12 months, we see material upside only through the announcement of an agreement with a major grocer that could demand far more OSP capacity than we forecast, or a takeover bid - neither of which we have visibility on."

Goldman said its price target assumes UK retail revenues increase from £1.3bn in 2017 to £7bn in 2030.

At 1250 GMT, the shares were down 1.6% to 559.40p.