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The Ocado (LSE: OCDO) share price is is hard to love. Most holders probably hate it by now. CEO Tim Steiner might well hate it too. It must keep him up at night.
Ocado is down 88% over five years, 38% over one year and 11% over the last month. At 234p, Ocado shares are miles below their 2020 peak of 2,819p. Anyone who chased that rally will regret it bitterly. Even those who bought after the fall have had little to smile about.
That includes me. I opened my position in 2023, thinking I was bagging a bargain. I’m down 42% on that trade. But what’s this? Broker forecasts hint at a possible turning point. Seven analysts now forecast a median 12-month target price of 282p — about 20% higher than today. It would turn £10,000 into £12,000. Can such things be?
FTSE 250 stock flop
A tempting prospect, if only it could be trusted. Some of those targets might be stale, served up before the latest share price slide.
I’m worried about Ocado’s towering debt pile. In February, full-year 2024 results revealed net debt of £1.2bn, up from £1.075bn in 2023. Fitch rates its debt B-, a whisker away from junk.
Refinancing efforts mean Ocado’s debt-servicing costs could reach nearly £100m this year, up from just £27.3m a year ago. That’s the downside of borrowing new money at 11% to repay older, cheaper debt. It bought time, but at a cost.
Ocado is at least showing signs of financial progress. Group revenue rose 14.1% in 2024 to £3.2bn, while adjusted EBITDA more than doubled to £153.3m. The cash outflow narrowed significantly from £472.5m to £223.7m. Ocado insists it’s on track to turn cash flow positive during 2026.
Yet the losses keep coming — £374.3m before tax last year. Cost-cutting has been brutal, with almost 1,000 job cuts in 2023 and more on the way.
Debt and demand
The bull case depends largely on US growth. If US retail partner Kroger scales up its robot warehouse orders, the shares could rebound at speed. Many will be watching Ocado’s half-year interim results on Thursday (17 July) for Kroger developments.
There was some good news from Europe on 18 June, when Ocado announced a new fulfilment centre in Catalonia with Spanish grocer Bon Preu. A modest win. Many more required.
There was also a bumper month for grocery sales in April, with Ocado Retail’s revenue jumping 18.3% year on year. That’s a bright spot, even if it was likely flattered by Easter timing and sunny weather.
Ocado was a rash buy on my part. More leap of faith than logic. Sometimes I think I only hold on to the stock to remind myself not to do that again. I’m hanging on because if it does recover, it could fly. However, I wouldn’t suggest anybody considers buying it today. It’s just too binary.
Ocado has a habit of making big moves on results day. The shares are on a hair trigger, and often react sharply to the slightest whiff of good or bad news. I’m preparing for the worst, while hoping for the best. Hope springs eternal. If only the Ocado share price did too.
