Member Info for Valueplay

Tesco leading grocers down as they confirm customers are cutting back and watching every penny. As said previously I expect Ocado retail to start losing market share going forward and to start incurring operating losses...

Cassandra,

You outline the international solutions and UK solutions and logistics business improving but that's set against small comparables from the previous year. Those overall revenues are still small.

Of course the revenues from the tech side could dwarf the retail side in time. Absolutely it could. However this cost of living crisis for me has, and is, blowing Ocado greatly off course from that occuring. With costs rising immensely this damages the profitability of the Ocado solutions model. Achilles heels of higher fuel costs, dry ice costs are to name but two issues that are causing a major re-evaluation of the profitability of the Ocado model. Couple all this with customer baskets across all geographies forecast to be smaller than previously predicted and online grocery growth rates reducing then the profits start to fall. No new overseas grocers have signed up since the new Ocado reimagined tech launch. Why? My belief is they do not see the profitability in Ocados tech that they once saw due to the huge ramp up of costs. Also I believe grocers are more focussed in investing in their core store offerings than invest in online grocery currently.

In the long term online grocery delivery may well become dominant however currently cost pressures and the lack of new contracts, issues I think will persist for a couple of years, are causing Ocados cash pile to be depleted. Long term Ocado may win out. Currently the more likely scenario I believe is that Ocado see costs further rise, Ocado retail sales further fall and Ocado cash reserves reduce, limiting their ability to invest as freely in new technology as they once did. If Ocados tech falls behind the competition or isn't profitable for customers then the share price will fall significantly further...

Certainly Cassandra,

It has been a year of complete change. Total reversal. One of the biggest seesaw years in the general macroeconomic environment that I can remember. Caught a lot of people out for sure. The biggest 2 investors in Ocado have held throughout and taken a huge cut in their holdings value Personally I exited Ocado with a great profit. Many though are still holding on looking for signs of a reversal in the fall.

The challenge isn't the past, it's the present. What is Ocado worth currently? Personally I feel it will fall further due to the numerous issues surrounding the company. Costs ramping up greatly in every area, no new overseas contracts, Ocado retail - the shop window for Ocados tech is not increasing market share and isn't making any profit etc etc..

Agreed Pearls,

Many are asking surely this can't go lower however when you start to look at some of the costs the Ocado distribution model is facing then the fall in share price is very understandable. Dry ice has risen in cost per tonne by 3,000% in 1 year. Dry ice is still used in Ocado delivery vans to enable frozen/ fresh items to be kept and delivered at the optimal temperature. Another online grocer, Picnic in the Netherlands has chosen to stop delivering frozen products due to the cost of dry ice. The cost of delivery for them is outweighing any profit to be made. This is just one of the huge cost increases facing Ocado. Fuel, robotic components, utilities, driver wages all increasing greatly whilst the customer is cutting back more and shopping more at discount grocers.

Personally I cannot see why new overseas grocers would sign up currently to Ocados solutions. Someone may believe that Putin may be overthrown or the war there will end early but there's every indication that the Russian/Ukraine war will continue to be a long drawn out affair. Many of the huge costs Ocado are facing will be increased for a considerable period reducing their capital reserves. Ocado retail currently isn't increasing market share or making any profit. I expect at the next results release that Ocado retail market share will start to fall and losses will be announced.

Best of luck casapinos. Your posts are well thought out and courteous. My research led me to move away from your current position re Ocado and I think you are underestimating the gravity of this crisis however let's see how things further pan out. I have similar market experience to yourself. Have witnessed and navigated profitability through no end of crises, bubbles and rumours. So many things learnt along the way. Always good I believe to constantly review, occasionally reappraise/ take tough decisions and not blindly trust the market.

Casapinos,

I'm very well aware of all your stated information. Personally I was very much a believer in Ocados technology and it's ability to prosper. However as the cost of living crisis has unfolded it became obvious to me that the Ocado model would not be attractive for other new grocers to invest in and that there would be declining revenue receipts at Ocado retail, which critically is the part of the business international grocers focus on to gain an understanding of Ocados technology.

Pokerchips

You are being very optimistic regarding the Casino joint venture. Good luck to you though.

SFH300,

Yes, I believed in the tech at the Reimagined launch. Since then though, many months ago, it became obvious to me that the take up of this tech will be far less than management are hoping for. It was a sign to me to bank the large profits within my Ocado holdings. The vast majority of your posts have been sceptical/ scathing of Ocado. Very hard to understand why you are still holding a stock you have such little belief in.

Ocado offer country exclusivity in their contracts. If a customer signs up they have sole use of Ocados tech within that given country. It's been a good tactic previously as companies have jumped in to secure Ocados technology ahead of rivals. The fact no new clients are signing up to their latest tech whilst Ocados cash spend and costs increase rapidly is a huge concern.

Fair enough if you are happy with this casapinos. Pokerchips, Ocado have had plenty of time to get word around and demonstrate their new bot..

Ok, haven't seen you post any gloomy gossip, of which there has been plenty re Ocado.

There's huge issues both inside and outside Ocado buffeting this company. The new tech customer order flow has dried up when the complete opposite was promised by management as a result of the Reimagined tech upgrade. Ocado retail, Ocados best tech showcase, is malfunctioning. Management leaving for greener pastures. Ocado is far more exposed to this current crisis than others.

Ok, you are not very positive on Ocado

I am very much looking at the long term when looking at listed companies, Ocado is no different. The current share price of course points to big problems for Ocado both short and long term.

More comforting though for many to ignore the structural issues and fantasise over an Amazon takeover...

Fair enough. You both are very positive on Ocado currently. So much so that terms of Ocado being a "no brainer investment" have been punted around.

Ocado used to attract top talent. Lately Ocado retail has lost two of its key management team. This follows 3 profit warnings this year from Ocado retail. Ocado recently admitted Ocado retail is not making any profit. Ocado retail also is not increasing market share.

The Amazon takeover has been thrown around many, many times over the years. I cannot see it happening, likewise the market doesn't believe it will happen as Ocado stock falls again today..

Ocado retails CEO left a few months ago. No successor was named at the time, it was an unplanned move, like this latest one.

I say it as I see it. After 3 profit warnings this year Ocado retail management are looking to progress their careers elsewhere..

You may think the Ocado ship is currently seaworthy Pokerchips. Ocado retail management know more though. Another one has abandoned ship today..

"Moneysupermarket.com Group PLC on Monday said it has hired Niall McBride as chief financial officer, subject to regulatory approval.

The FTSE 250-listed comparison site operator said McBride is currently CFO at Ocado Retail Ltd, a joint venture between Marks & Spencer Group PLC and Ocado Group PLC."

True chilting, this government favours the rich and the rich are more likely to shop at Ocado.

Limited effect overall though I believe, not enough to help Ocado retail avoid a probable 4th profits warning later this year. Even the rich are wanting to source their goods more cheaply in this cost of living environment crisis..

Totally agree chilting.

Given we currently have an incompetent government no stock currently can remotely be classed as a "no brainer long-term investment"

Pokerchips,

Of course I and I'm sure yourself do not wish nuclear weapons to be fired. When investing in the stockmarket though an investor needs to examine not just the company involved but competing companies, market conditions, possible black swan events - wars etc. Successful reading of market conditions can bring great rewards. Moving fully into cash when an investor foresees considerable negative market turbulence outside that which the market is factoring in can be extremely rewarding - avoiding great losses and allowing entry points into stocks further down the line at very low levels from which the stocks can then grow in value..

If you

Pokerchips,

There is some disquiet in Russia as you point out but Putin has a long successful record in dealing with disquiet.

Sure traders will still buy into the market however personally I believe this war will extend and prolong more than the financial markets are factoring in. I've had my funds in 100% cash for many months waiting for these times. Very happy to stay as I am and watch things crumble..

Pokerchips,

I share your distaste for Putin but disagree with your analysis. I see this war being further prolonged and protracted. The black swan event of the use of nuclear weapons hangs over the stock market as it does Ukraine..

Pokerchips,

Yes Ocado have recently fundraised to add to their cash position but the current extraordinarily adverse retail headwinds consume capital very quickly. Costs will be rising in every aspect of their business. Without international grocery retailers signing up to their tech and with Ocado retails profitability declining greatly then revenue streams start to dry up.

Jorn Rausing looks supportive yes however many, many billionaires misjudge investments. Before his latest Ocado share purchases Jorn was last buying Ocado shares around the £19 mark. His purchases didn't halt the drop in Ocado share price.

Many will have a lot to say regarding Ocado. Most others see that Ocados once bright potential is greatly dimmed currently. As the batteries run low I wouldn't be surprised if other big shareholders start selling off their holdings..

Pokerchips,

Plenty of great companies have gone bankrupt before the ideal conditions for their technology is reached. These absolutely immense headwinds Ocado are facing could well bring Ocado tumbling down.

The Canary wharf development went bankrupt in 1992. Of course it is now a success.

Ocado may well follow the same path and fail in the short/medium term allowing a larger company to pick up the broken pieces for a very small sum and take the technology onwards...

Treacle,

The share has been hammered lately due to various unsurprising broker downgrades in the last few days. Jorn Rausing would have his own ideas as to when a new overseas contract may come for Ocado solutions. However he will not know for sure. The set up at Ocado would not allow Jorn Rausing to access definitive new contract negotiation information. If he was buying shares acting on inside information he would risk a huge market fine for both himself and Ocado group.