The Ocado (LON:OCDO) share price is likely to push higher today as the full year earnings guidance was raised again.
The company now expects full year EBITDA to be more than £70 million. Keep in mind that in early November it announced that profit would be at least £60 million, which was a big increase from the old forecast of, in excess of £40 million. This morning’s trading statement covered the fourth quarter and retail revenue grew by 35%. The online grocer confirmed that customers continue to embrace the full Marks & Spencer range of products – the joint venture was launched in September. Ocado will open three new warehouses in 2021 and that will boost capacity by 40% - this is huge by industry standards.
Ocado has been one of the few companies to benefit greatly from the pandemic but it wasn’t smooth sailing in the last few years. The online grocery spent a lot of time and money honing its skills and it took several years before it finally broke out of the UK and managed to gain exposure overseas. In late 2017 it entered into a joint venture with Groupe Casino of France and within a couple of years the firm signed up for ventures in Canada, the US, Australia, Japan, Spain and Sweden.
In recent years, consumers were gradually embracing e-commerce and the pandemic turbocharged the drive to online shopping. There were points when Ocado was not taking on new customers because they were already at max capacity. The prospect of vaccines being in the pipeline should see demand for Ocado fade a little but a certain chunk of the new customers they signed up amid the pandemic will probably continue to shop with them, now that they are in the habit. The firm should find it easier to broker new deals with other supermarkets around the globe as everyone now realises the importance of e-commerce.
The Ocado share price had a reasonably subdued start to 2020. It moved higher at the beginning of the year and in January it hit it its highest level since late November, but it was already sliding before the pandemic erupted. When panic selling set in, the stock dropped to an 11 month low in March but then it rebounded and went on a bullish run until late September – in the Ocado share price rallied over 190%. Since the highs of late September, it has pulled back over 20%, as traders have been rotating out of online related stocks and into traditional companies like airlines and high street retailers.
The Ocado share price has been trading sideways recently but while it holds above the 200-day moving average at 2,048p, the broader uptrend should continue. A rally from here could run into resistance at 2,647p, and a break above that metric should put 3,000p on the radar.
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