RE: SURVEY3 Nov 2025 10:38
Several brokers have recently downgraded Ocado Group PLC, citing concerns over the execution risk of its automated warehouses, uncertainty with its U.S. partner Kroger, and the potential need for future capital raises. Morgan Stanley and Bernstein are just two of the firms that have issued downgrades, cutting their price targets and warning of challenges ahead, particularly regarding the timeline for the company to become profitable.
Morgan Stanley: Cut its price target to 170p and maintained an "underweight" rating, citing "increased execution risk" and concerns that its U.S. client Kroger is using more asset-light delivery methods. The firm also anticipates Kroger closing more Customer Fulfilment Centres (CFCs) and shortening their operational lives.
Bernstein: Downgraded Ocado to "underperform" from "outperform" and significantly slashed its price target from 1,000p to 250p. This downgrade was based on factors including the potential need for significant capital raises in the near future.
Reasons for the downgrades:
1. Execution risk: Analysts are worried about the company's ability to successfully execute its automated warehouse strategy.
Kroger uncertainty: Morgan Stanley noted that Kroger's recent moves suggest a potential pivot to alternative delivery methods like using Instacart for faster deliveries.
2. Financial concerns: Some brokers believe the company may need to raise substantial additional capital, which creates a potential overhang for the share price.
3. Company performance: Despite the downgrades, Ocado has recently posted improved results, including narrower interim losses and higher revenue, leading to short-term stock surges following the news. However, many analysts remain cautious about the long-term profitability timeline.
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