The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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Partly that. Lot of stock rotation occuring. Overdone in my book. Looks a good opportunity currently.
I think that the current dip can partly be explained by Covid.
Ocado did very well out of Covid, now the market expects Ocado to prove that it can benefit in the long term.
So, it will be up to Ocado to provide that proof - when it does the SP will recover.
True chilting, that increasing revenue is very valuable, costs though are going to be high for several years. They will also need to borrow whenever a new overseas contract is signed. Capital raises to finance new contracts will be well received by the market but the terms offered by Ocado will have to be more tempting than before as bond yields rise.
I believe Ocado has been hit too hard by the current tech storm for the many reasons I stated. One of my reasons though for topping up was that I believed bond yield rises were levelling off. This is under pressure currently. They rose yesterday but are down so far today.
Tim Steiner was a bond trader at Goldman Sachs for 8 years prior to being Ocado CEO. He has expert knowledge of the markets that are rocking the boat. He's managed the financing of Ocado superbly so far. Ocado raised £1bill last June (realistically the maximum amount they could raise then). Many brokers remarked at the time why does Ocado need the cash as it already had £1bill in the bank? It makes a lot of sense in hindsight, that raise would be a lot more costly and less popular if it was announced today rather than last June. The extra cash flow raised at a very low rate locks in low finance costs for Ocado over the next year/2 years.
Ocado group do have their crown jewel of half the Ocado retail joint venture. It's worth somewhere around £1.75bill. Many buyers would be interested were it for sale. At some point in the future this sale will provide a big boost to finances.
Many aspects of Ocado group are still misunderstood and its future potential I don't believe is factored into the current share price.
Best to all.
Valueplay
Ocado may not have to borrow so much in the bond market going forward as more revenue flows in from Ocado Solutions clients.
Plus their free cash flow becomes less valuable to investors who can then get better returns on safer assets elsewhere.
I'm no expert but from what I can gather when bond yields increase tech stock go down. Something to do with them regularly going to the bond markets and having more % interest to pay on future borrowing.
I'm know expect but from what I can gather when bond yields increase tech stock go down. Something to do with them regularly going to the bond markets and having more % interest to pay on future borrowing.
Whats that mean exactly for ocado for investors ?
Thanks for the announcement, you Right, actually technological companies went downstairs at the same time
It might get there, or even 19 -ish....if something doesn't change quick.
If that’s gets anywhere near 2000 I’ll be doubling up.
Will keep in mind thanks.
I can see Just Eat down too again, not in favour either due to covid easing. However furlough extended to September isn't a sign the virus has finished.
You can book an Easyjet flight to Italy this summer, but you WON'T necessarily be allowed in!
As a software development company Ocado is disproportionately sensitive to interest rate rises though. You will see in my graph that the US treasury yield is spiking today. Future interest rates are always something to consider when owning Ocado shares. Recent rises have surprised the market.
Thanks, just seems a bit disproportionate to others at moment. The future bright yes, but if goes below 21 currently, that's not a good sign.
Interest rates are now forecast to move higher quicker in future. Ocado goes to the bond market every 2 years or so to finance it's new contracts and expenditure. Costs of finance are forecast to be more in future. This hits the share price. US 10 year treasury is key indicator. UK rates usually move in line with it in time.
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
Apart from the predictable "it's totally overvalued" response from the usual de-ramping crowd, I can 't quite see why we are headed down so low in such a few weeks, faster than even when Autostore was announced.
Yes, budget was good for Ocado. Bond yields rising again today in the US today after falling yesterday. This weighs on Ocado (a software development company) and tech stocks in general.
No unexpected negatives for Ocado and no mention of an online tax.
All good in fact, especially for growth companies like Ocado who plan to invest.