Ocado’s (OCDO) shares surge over 9%: Right time to buy?

3 min read | December 15, 2021 01:19 AM AEDT | By Suhita Poddar

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Ocado’s (OCDO) shares surge over 9%: Right time to buy? — Image source: Blue Planet Studio,Shutterstock.com

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Highlights

Ocado Group’s shares surged by over 9 per cent on Tuesday after the group’s JV Ocado Retail Ltd said it expects a ‘best-ever Christmas ahead’.

The JV’s Q4 2021 retail revenue was higher by 31.6 per cent to £547.8 million from its pre-pandemic levels seen in Q4 2019.

Ocado Retail forecasts its 2022 revenue growth to be in the mid-teens, at the top range between 10 to 15 per cent.

Online grocery solutions company Ocado Group PLC’s (LON: OCDO) shares rose by over 9 per cent on Tuesday after the group’s JV, Ocado Retail Ltd, said it expects a ‘best-ever Christmas ahead’ in its Q4 trading statement released today.

Ocado Retail Ltd is a joint venture between Ocado Group and retail major Marks and Spencer (LON: MKS)

Ocado Retail Ltd’s Q4 trading statement

The JV’s Q4 2021 retail revenue, for the 13 weeks to 28 November 2021, stood at £547.8 million, compared to £570.1 million in Q4 2020.

The Q4 2021 retail revenue was higher by 31.6 per cent from Q4 2019’s pre-pandemic levels, which was £416.2 million.

The company’s Q4 2021 average orders per week rose by 8.5 per cent to 375,100, compared to 345,700 in Q4 2020. It was higher by 14 per cent from 328,955 in Q4 2019.

The rise in customer orders per week was attributed to the increase in active customers by about 22 per cent to about 832,000 orders.

Ocado Retail’s 2022 outlook

The company forecasts its revenue growth in 2022 to be in the mid-teens, at the top range between 10 to 15 per cent. This range was the company’s historic pre-pandemic range.

The retail JV said it had witnessed the fastest ever ramp-up at its Andover and Purfleet sites and expects its Bicester site to open by next summer around H2 2022.

Ocado Retail plans to make about £50 million worth of investments in the next year in several areas. The investments are expected to help with its growth for the year and also for the longer period.

Ocado Retail plans to allocate about 50 per cent of this investment towards boosting capacity, while the remaining will be spent across various areas, including marketing, measures taken to address the labour shortage and more.

The retail JV plans to rebuild its earnings before interest, tax, depreciation and amortisation (EBITDA) margin towards the levels seen in 2021 after making a major investment in the next year.

Ocado Group PLC (LON:OCDO) share price performance

OCDO share price and volume

Image source: EODHD/Others

Ocado’s shares were trading at GBX 1,740.00, up by 9.37 per cent on 14 December at 11:12 AM BST. Meanwhile, the FTSE 100 index, which it is a part of, was at 7,268.76, up by 0.52 per cent.

The group’s market cap stands at £11,956.15 million as of 14 December.

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