Bernstein downgrades Ocado to ‘underperform’, slashes price target

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.

At 0940 BST, the shares were down 8.8% at 346.70p.