The Ocado (LSE:OCDO) share price has been a horror show in recent years. In fact, off the top of my head, I can only think of Aston Martin and THG that have done as badly.
How bad are we talking? Over five years, bad enough to have turned a £2,000 investment into about £200 today!
The share price chart spells it out clearer than any words can…
Is there any hope for this FTSE 250 stock? Let’s see what the experts think.
What happened to Ocado’s robot revolution?
Ocado’s probably one of the most recognisable brands on the London Stock Exchange. The online grocer’s vans, with their colourful fruit and vegetable designs on the side, can be seen nipping about.
As well as the UK operation (a joint partnership with Marks & Spencer), the firm builds robotic customer fulfilment centres (CFCs) for other supermarkets around the world. Clients include Kroger, Aeon (Japan), and Australia’s Coles.
This was where all the promise was for growth investors a few years ago. Once these automated warehouses were up and running, they were expected to drive significant cash flow growth for Ocado, potentially over decades.
Here’s how growth stock specialist Scottish Mortgage summarised the bull case in 2023: “The more fulfilment centres Ocado builds, the greater the competitive advantage it should gain. And while giant retail rivals Amazon and Walmart have their own grocery automation ambitions, it’s possible Ocado could become the market-leading technology provider as its hives of activity spread worldwide“.
As the share price tells us though, things have not gone to plan. Turns out, in a higher interest rate environment, some grocers see better value in picking orders directly from existing physical stores.
As such, demand for CFCs has waned significantly. And with Ocado still posting losses, even after 26 years of operations, investors have soured on the investment case.
The latest price forecast
What do City brokers think? The latest 12-month price target is 218p, almost 17% higher. But they’re very torn on Ocado, with four seeing good value in the shares, another four saying Hold, and three rating Ocado as a Sell.
To be fair, some of these price targets will have been made before a couple of recent deals were disclosed. One was this week when Ocado announced a new deal to build a CFC for a “fast-growing European national retailer“.
This followed news that Asda will deploy Ocado’s software suite across its UK-wide online operations from 2027. Using the firm’s platform, Asda will be able to process and deliver orders placed through apps like Uber Eats, Deliveroo, and Just Eat.
Should I have a nibble at Ocado shares?
Looking ahead, the company expects to turn cash flow positive in FY27 (which starts at the end of November). If it can achieve this, the share price could recover strongly.
Then again, we won’t know whether that will have been achieved until early 2028. For me, this makes the stock somewhat of a gamble, even after the massive crash in recent years.
Weighing things up, I reckon there are more attractive investment opportunities across the FTSE 250. I’m thinking about profitable companies with proven business models that pay dividends and are trading cheaply.
Should you invest £5,000 in Ocado Group Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Ocado Group Plc made the list?
Ben McPoland owns shares in Scottish Mortgage and Uber.
