Proactive Investors - Ocado Group PLC (LON:OCDO) led the way as the FTSE 100’s top riser on Thursday morning, despite trimmed-back expectations from Goldman Sachs (NYSE:GS).
Though Goldman pointed to the growing prevalence of quick delivery, click and collect, and third party platforms as rivals to Ocado’s grocery business, the bank did point to strong potential in non-food sectors.
This comes after Ocado announced its first non-food automated distribution contract deal with pharmacy firm McKesson Canada in November.
“If Ocado is able to deliver this [...] without significant delay, cost overruns, or integration obstacles, we believe it is unlikely that McKesson will eventually only order one facility,” the bank said in a note.
“Instead, it is likely to automate further parts of the fulfilment network.”
Deals to distribute on behalf of fashion retailers and automotive parts suppliers also present opportunities for Ocado, according to Goldman, with these likely to require less capital commitment than grocery agreements, regardless of being worth less.
Shares in the online grocer were up almost 10% at 707.2p on Thursday morning, though analysts at the bank had cut 12-month targets for the stock from 900p to 700p earlier on.
Goldman also reiterated a ‘neutral’ rating for Ocado, citing reduced cash flow from Ocado’s grocery wing on the back of growing competition.