Sharecast - The bank said it has spoken to a number of industry experts and built a differentiated customer fulfilment centre (CFC) contract roll-out model across all of Ocado (LON:OCDO)'s Tech Solutions contracts.
"What we do not debate is that Ocado's grocery technology is market-leading and its Re:Imagined program should improve this further," it said.
"However, our main conclusions from our expert conversations and analysis are: (1) Ocado's medium-term guidance is at risk from existing customer CFC/ module roll-out delays, (2) new customer pipeline is limited in grocery space - and Autostore (covered by Tim Lee) is getting more competitive, and (3) non-grocery deals may be signed soon - but we are sceptical about how much this can scale in the near term without a clearer go-to-market strategy.
"At the same time, (4) Ocado's impending debt maturity wall means that its operating trends in the next 12 months will have an amplified effect on valuation, and (5) current Amazon/Autostore trial in the US presents a significant negative tail-risk that is not well understood."
Barclays (LON:BARC) noted that the shares are at a discount of around 80% to September 2020 highs, while its price target is a discount of around 55% to the recent July 2023-highs.
"So why UW here? Valuation is particularly challenging given the lack of free cash flow support, in our view, and sentiment matters as much as earnings momentum," it said.
At 1020 BST, the shares were down 4.8% at 505.40p.
