Ocado Times article22 Jun 2021 15:15
https://www.thetimes.co.uk/article/ocado-delivers-the-goods-as-grocers-get-a-big-push-ks859gxfj
Ocado delivers the goods as grocers get a big push
Tuesday June 22 2021, 12.01am, The Times
For the past couple of years, Tim Steiner has been trying to convince the City that Ocado is not a food retailer but a technology company. Given the punchy valuations that are ascribed to anything with a website these days, one can see why he wants the tech label.
Yesterday, however, the Ocado boss no doubt would have been less vocal in his efforts to secure that technology status. Supermarkets were all the rage, as Clayton, Dubilier & Rice’s £5.5 billion bid for Wm Morrison brought the rest of the sector into play. Tesco, the nation’s biggest grocer, improved 3¾p, or 1.7 per cent, to 225½p and J Sainsbury put on 10p, or 3.8 per cent, to 270p. After Morrisons, which soared 61¾p, or 34.5 per cent, to 240¼p, the next best was Ocado, which closed 76p, or 4 per cent, up at £19.57.
Ocado got an extra boost from a very supportive research note by Morgan Stanley, which told clients to pile in after its share price slide. Before yesterday, Ocado shares were down 16 per cent in the year-to-date and had fallen by more than a third since last September’s record high. “We argue this represents an attractive entry point,” Maria-Laura Adurno, a food retail analyst at Morgan Stanley, said as she lifted her rating up to “overweight”. She added: “We view Ocado shares as the best long-term hedge to grocery disruptions.”
Morgan Stanley reckons that at Ocado’s present value, the market is pricing in about 388p of new contracts. “That would imply only four small new contracts,” Adurno said. That, she argued, is not enough for a company operating in a grocery market worth $725 billion. At the moment, online ordering accounts for only 8 per cent, Morgan Stanley estimated, but it is likely to “see attractive growth over the next decade” as its popularity accelerates.
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