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Ocado Group (LON: OCDO) share price is in a wait-and-see mode as investors assess the recent takeover rumours. The stock was trading at 567p on Friday, a few points below the year-to-date high of 635p. While the shares are up by ~66% this year, they remain over 805 below the all-time high.
Wait-and-see mode
One of the top retail news last month was a potential tie-up between Ocado Group and other companies, including Amazon. Ocado and Amazon are yet to accept or deny these rumours. As a result, most investors are now in a wait-and-see mode, with holders hoping for a deal.
Another important news is that the wealthy Agnelli family remains optimistic about the company. Lingotto Investment Management, which is chaired by George Osborne, disclosed a bigger than 5% stake in the company.
As I have written before, Ocado’s fundamentals are not all that strong. As a result, a takeover would help to ameliorate more pain in the near term. Ocado has been losing millions of pounds every year.
In February, the company said that its loss jumped to a record high of 501 million pounds in the last financial year. And analysts believe that it will turn cash flow positive in either 2025 or 2026. Its available liquidity of 1.3 billion pounds will be enough to see the company through.
There is no easy way out for Ocado. Some analysts believe that the company could solve this by becoming a pure-play technology company. It can do this by offloading its 50-50 joint venture with Marks and Spencer, a leading UK retailer.
The remaining company will be its warehouse technology company that provides services to the likes of Kroger and Casino. While this business is now small, analysts believe that it will report strong revenue growth in the coming years.
Ocado share price forecast
It is a bit risky to conduct a technical analysis for a company like Ocado that has some acquisition rumours. On the daily chart, we see that the shares have already crossed the important 50-day moving average. But it remains stubbornly below the 200-day moving average.
The current price is also notable since it coincides with the highest point on March 31st of this year. In my view, I believe that Ocado will not receive a takeover bid because of its high cash burn. As such, there is a likelihood that the stock will retreat to the next support at 480p.
However, in case a takeover bid happens, the shares will likely jump to the key resistance points at 700 and 800p.
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