Proactive Investors -
- FTSE 100 up 3 points at 7,602
- Oil and mining stocks advance
- Ocado (LON:OCDO) falls as Barclays (LON:BARC) downgrades
Ocado slips as Barclays downgrades
Ocado Group PLC (LON:OCDO) tops the FTSE 100 fallers, down 4.1%, after Barclays downgraded the stock to underperform from equal weight.
It also slashed its price target to 430p from 680p.
The broker said it follows a deep-dive into Tech Solutions, which is around 80% of its enterprise value, based on expert conversation and differentiated customer fulfilment centre (CFC) contract modelling, which points to Ocado missing medium-term guidance.
Barclays sees more downside risk in the next 12 months.
While it does not dispute Ocado's grocery technology is market-leading it thinks Ocado's medium-term guidance is at risk from existing customer CFC/module roll-out delays.
It also highlighted competitive pressures from Autostore while it is sceptical how much the company can scale non-grocery deals.
At the same time, Ocado's impending debt maturity wall means that its operating trends in the next 12 months will have an amplified effect on valuation, while the current Amazon/Autostore trial in the US presents a significant negative tail-risk that is not well understood, Barclays said.
Hipgnosis tumbles as pulls dividend
The FTSE 100 has pared its gains but remains in positive territory. up 9 points, at 7,609.
Mining and energy stocks continues to lead the way, after the oil price rose above $90/barrel while the downgrade by Barclays continues to weigh on Ocado, down 4.1%.
Over in the FTSE 250, the big mover is Hipgnosis Songs Fund Ltd (LON:SONG).
Sshares have plunged 16% after it pulled payment of its interim dividend after warning that debt covenants would have been at risk because of a change in royalty payments made to songwriters in the US.
The UK-listed music rights owner said the company’s independent portfolio valuer, Citrin Cooperman, had “materially reduced” expectations of industry-wide payments following a decision last year to recalculate the rate by the US Copyright Royalty Board, it said.
The decision covered royalties payable to songwriters between 2018 and 2022, and would mean that the company will receive “significantly lower” payments.
As a result, Hipgnosis said it would withdraw the interim dividend proposed last month, to ensure compliance with the terms of its revolving credit facility.
The fund manages music from the likes of Justin Bieber, Neil Young and Shakira.
FTSE 100 higher, energy and mining stocks rise
The FTSE 100 opened higher supported by rising energy and commodity stocks amid concerns the crisis in the Middle East could spread.
At 8:15am, London’s blue-chip index was up 23.48 points, 0.3%, at 7,623.08 while the FTSE 250 rose 37.63 points, 0.2%, at 17,491.85.
Susannah Streeter, head of money and markets, Hargreaves Lansdown (LON:HRGV) said: “As risk-off sentiment has been spreading, investors have been seeking more defensive positions amid fears of conflict escalating in the Middle East.”
“The FTSE 100 looks set to benefit from higher energy prices with oil and gas prices dipping back but remaining at elevated levels, having jumped sharply over supply concerns.”
BP PLC (LON:BP) and Shell PLC (LON:SHEL) rose around 0.8%, while miners Anglo American (JO:AGLJ) rose 1.4% and Glencore (LON:GLEN) 1.3%.
Ocado fell 2.6% as Barclays downgraded the stock to underweight from equal weight and slashed its price target to 430p from 680p.
Heading the other way was Severn Trent (LON:SVT), up 1.6%, as Jefferies upgraded to buy from underperform.
The broker also upgraded Pennon (LON:PNN), up 1.2%, to buy from underperform and United Utilities, up 1.3%, to buy from hold.
THG (LON:THG) jumped 4.7% on reports it could spin off its Myprotein nutrition arm in the US, while boohoo Group PLC rose 1.8% after Mike Ashley’s Frasers Group PLC upped its stake once more.
Cerillion was another stock on the move, up 9.5%, after it said profits would be ahead of expectations in an upbeat trading statement.