The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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Shorts have again increased to make OCDO the 3rd most shorted company in the UK market. Here's a link to the detail, but you can get it yourselves at Shorteurope.com. Obviously those shorting the company believe it has further to fall. Institutions that short are not always right and don't always make a profit. Make of it what you will.
https://screenrec.com/share/LH3QBeiAv0
I wish I could share this optimism. However, as per an earlier post of mine here I am worried that Ocado could face a liquidity crisis in the next two years if it continues to fail to make a net profit. This is very important to remember.
The company burns through a lot of cash and even though it has over £800m of cash on its balance sheet (as of 3rd Dec 2023), it will likely experience liquidity problems by the end of 2025 if it fails to generate a positive net profit by that time.
The company also has £1,459.5m of borrowings as of 3rd Dec 2023 with the majority of these in the form of convertible bonds with maturity dates from 2025-27.
I fear that at some point in the not too distant future, the company will either have to increase it's borrowings on unfavourable terms or raise more money via a placing at potentially a lower share price than the current one, which could be pretty dilutive.
I am also unhappy by the grotesquely excessive amount of money Tim Steiner has been paid over the years. This is absolutely insulting for a company that has still failed to make a positive net profit. I am not against big pay packages. Tim Cook at Apple gets paid a lot but he is worth it since Apple is quite simply a cash machine generating beast of a company. Ocado isn't.
If it wasn't for these risks then I would agree that the current share price is a bargain.
I wish I could share this optimism. However, as per an earlier post of mine here I am worried that Ocado could face a liquidity crisis in the next two years if it continues to fail to make a net profit. This is very important to remember.
The company burns through a lot of cash and even though it has over £800m of cash on its balance sheet (as of 3rd Dec 2023), it will likely experience liquidity problems by the end of 2025 if it fails to generate a positive net profit by that time.
The company also has £1,459.5m of borrowings as of 3rd Dec 2023 with the majority of these in the form of convertible bonds with maturity dates from 2025-27.
I fear that at some point in the not too distant future, the company will either have to increase it's borrowings on unfavourable terms or raise more money via a placing at potentially a lower share price than the current one, which could be pretty dilutive.
I am also unhappy by the grotesquely excessive amount of money Tim Steiner has been paid over the years. This is absolutely insulting for a company that has still failed to make a positive net profit. I am not against big pay packages. Tim Cook at Apple gets paid a lot but he is worth it since Apple is quite simply a cash machine generating beast of a company. Ocado isn't.
If it wasn't for these risks then I would agree that the current share price is a bargain.
FTSE rise is nothing compared with USA. Just saying!
AAL takeover possibility in ftse 100. One could only hope the same for Ocado...Fingers crossed!
Now.
I repeat what I said the other day here. Shorters are on thin ice. Takeover target, move to NASDAQ, new contract wins (Nike rumoured), general growth into non retail markets, interest rates past their peak, EBITDA heading in the right direction...and a few other good reasons why the SP should tick upwards. I am all in favour of a move to the US market because they need to distance themselves from UK where people vjew then as a supermarket. Huge potential market for Ocado.
Same here. I get that most here are only interested in 5/10% swings. I invested in the only mainstream publicly traded tech company in the UK because I want to go along for the ride.
I was invested in Tesla a few years back when all of the dominant narrative was that they were a garbage company that would never be able to make any profit.
Every day there were negative stories in the press magnifying minor issues. It's quite easy for short sellers to plant stories in the press. As happened with NatWest a few months back.
I don't think Ocado is another Tesla but I do believe there is value here that is not reflected in the SP. Some of this is down to the moribund UK market, which seems to be in it's death throes.
Lack of liquidity is the issue, hence the constant spikes up and down on share trades of £1m or so.
So that's why the Nasdaq move makes sense and the decision to drop reporting of Ocado Retail seems like a step towards simplifying the investment case.
Have to give amongst supermarkets and OCDO sp may rise from this low.
As an investor and not a trader I am confident that the SP will re-rate. Key rationale for me:-
The SP has dropped from £30ish down to just one tenth of that in a couple of years. Ocado have more clients, the technology is more mature and their revenue is up over the last couple of years from that point.
The current SP means that Ocado is ripe for a takeover bid.
The executive should be looking at a transition to the States where leading edge technology solutions are much more favoured, hopefully we hear positive action on that at the AGM next week.
AI is the future there is no two ways about it. Ocado have a leading edge AI solution.
The longer the hedge funds have shorts in play the more interest they pay and they will have targets and margin calls versus their longs and for me it must be close to the point where they start to exit.
The M&S stand off regarding the rebate must be resolved give they are in partnership or M&S could look at acquiring Ocado's stake.
In summary a takeover approach, M&S resolution of the rebate and/or move to the States for me means the potential for a big re-rate is high. GLA.
Also added couldn't resist
Sales increases at the likes of Kroger and Sobey's are more relevant to the value here than the prospects of Sainsbury's and other UK supermarkets.
Ocado Retail is not the only demonstrator. Both Kroger and Sobey's have recently announced big increases in digital sales, which Ocado stand to get a cut from.
As for Ocado I posted the other day that they are the number 1 brand for customer service across all sectors.
Would be interesting to know what the brand is actually valued at. I saw a suggestion the other day that Revolut brand alone is worth about 3bn dollars. Not suggesting Ocado brand is worth that but it must be worth a few quid.
Opp knocks for me.
Ocado retail is like a demonstration of the model. If it does well then more people are like to purchase the solutions.
Should continue the downward trend fall and touch 350p today.
And there we go again. Assessing the strength of a warehouse automation as a service company by the metric of sales in the grocery sector.
When and if significant profit comes it will be from Ocado Solutions, not UK grocery sales.
Could be a good thing. If ocado retail is picking up market share then its going to be from the likes of sainsburys not lidl/aldi
It looks like Casino investing in UK.
Would not surprise me if someone makes a takeover bid for major UK companies. Just my thought.
Didn't look particularly encouraging to me, but I'm not an accountant and haven't followed SBRY recently. Some posters on here suggested the results might help us understand how things might go with OCDO's retail arm. Will be interesting to see.
Yes Stupmy, I'm not in deep - it's a pure punt and has been for a long time in my view.
I do think the tech has potential if marketed and managed appropriately. I also think retail has done a good job in testing circumstances and that the current management appear to be driving improvements in a tough market. But the lack of profitability in the tech side after many years is becoming deeply concerning.
01-Mar-23 - Barclays Equal Weight - 740.00
02-Jun-23 Price 3 months later was (drum roll please) - 358
Ocado slips as broker bats off US-listing talk as 'stunt'
I sold out at 3.77 yesterday as it struggled to sustain any rise. Nearly did when it went to 3.98 the other week. May look again if we drop nearer £3
I did wonder that boyo, have regularly wondered about analyst views in the past as they often co-incide with chart related bits and pieces. Funny really. Anyway, for safety I'm currently out, have no idea which way the SP will go on out of hours news.
It looks like HSBC just found the gap from over six years ago that I mentioned a week or two back. 264 would be my target in that region - https://invst.ly/14i-sa but it needs to fall into range first and that's not a certainty at this stage.
I'm rather neutral - comfortable either way thanks to recent trades but I note that HSBC had less impact on the price than Exane plus I am detecting a stronger vibe regarding retail and I'm anticipating a good statement from M&S in May. My doubts about the technology have also been lessened by some of the unconvincing and unsubstantiated comments here (and I'm not referring to VP). I don't mind the shorters - they help me get good value and their pump 'n dump pattern is great for trading once you get into the rhythm of it. Lot's of extreme views here - so it can be more entertaining than just checking the chart, even if it's not quite as reliable.