FTSE 250 movers: Ocado slumps on downgrade
FTSE 250 (MCX) 21,106.48 -0.45%
Bernstein downgraded Ocado on Monday to ‘underperform’ from ‘outperform’ and slashed the price target to 250p from 1,000p, "having been one of the last bulls standing".
It said the jam tomorrow story is now "less jam, more tomorrow". Bernstein noted that customer fulfilment centres have been paused or pushed back, refinancing is looming, "Kroger is stuck", and the company will need more cash.
"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 no ramped as expected.
"Partnerships have been paused (Kroger, Sobey’s) or delayed (Coles)."
Bernstein said that given the slower uptick in demand, it was making cuts to its model and reducing the price target.
"We push out more CFCs and change the ramping schedule from 3 to 4 years," it said.
Bernstein said it thinks Ocado will need "significant" additional capital (£0.5bn to £1bn) on top of refinancing £1.45bn debt over the next two to three years.
It said Ocado needs to seriously rethink its options. It needs to consider whether it’s right to be a public equity and what it could do to reduce cash burn in the short term.
Watches of Switzerland fell as sector peer Swatch slumped on European markets after first half sales and operating profit fell due to weak China demand.
Sentiment was also dented by weak GDP figures from China. Data from the China’s National Bureau of Statistics showed that second-quarter growth slowed to 4.7% year-on-year from 5.3% in the first quarter, missing expectations of 5.1% growth.
ING said "weak consumption and property continued to be a drag on growth" and added that more policy support will be needed in order to achieve this year's 5% growth target.
Annual retail sales growth slowed to 2.0% from 3.7%, missing the 3.3% estimate, reflecting continued weak domestic demand.
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FTSE 250 - Fallers
Ocado Group (OCDO) 331.80p -12.68%
Watches of Switzerland Group (WOSG) 385.80p -5.12%
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