Ocado turns the tables on all its City naysayers
HOW the times have changed for
Ocado. For years, the online grocer was sneered at by financial folk who questioned its methods and bet that its share price was about to crash at any moment.
But since it sealed a deal with US supermarket Kroger last May and an agreement to replace Waitrose with Marks & Spencer in February, many in the City have held their hands up and admitted they were wrong.
Shares surged last night after JP Morgan analysts declared it has a ‘superior economic model’ to bricks-and-mortar rivals.
JP Morgan’s bullish stance on the once-derided online supermarket, which now appears to be racing ahead of its ailing storebased rivals, sent shares up 4.6pc, or 53p, to 1204p.
Although they kept a ‘neutral’ rating on Ocado’s stock for now, the analysts laid out a compelling case for future optimism.
Ocado spends the least amount of money in the industry physically putting together a customer’s online order because of the millions of pounds it has ploughed into robots at warehouses. JP Morgan noted.
The analysts said this means it is now at a tipping point in terms of profitability.
After Ocado made a full-year loss of £44.4m in 2018, investors will be hoping they are right.
The Footsie started the week off on the right foot, rising 1.02pc, or 72.50 points, to 7189.65, as oil giants, miners and Asia-exposed banks gained. Meanwhile the mid-cap
FTSE 250 rose 1.47pc, or 276.12 points, to 19,097.97. Shares in energy majors Royal
Dutch Shell and BP rose around 2pc, tracking a similar rise in oil prices, after Yemen’s Houthi rebels launched an attack on a huge oil and gas field in Saudi Arabia, upping the ante in an already tense Middle East.
Shell closed up 1.7pc, or 39p, at 2315p, while BP lifted 2pc, or 9.9p, to 500.1p.
World events also pushed up the share prices of some of London’s heavyweight miners and banks that have a big presence in Asia.
China’s central bank announced reforms to lower borrowing costs for companies and bolster the economy, which has been hit by the trade spat with the US. Asia-focused lenders HSBC and
Standard Chartered climbed on the move, respectively rising 1.1pc, or 6.5p, to 603.7p; and 1pc, or 6p, to 618.4p.
And mining groups gained on the package too, with BHP rising 1.5pc, or 26.2p, to 1781.4p, Rio Tinto up 1.5pc, or 60p, to 4065p,
and Anglo American up 2.4pc, or 41.2p, to 1739.6p.
China is the world’s largest consumer of metals, meaning anything which supports its economy is likely to boost demand. Mitie has sold its catering arm for £85m to a rival as part of efforts to simplify the business.
The outsourcer’s Gather & Gather unit is being bought by CH&Co for £73m up front, plus another £12m over the next four years if performance targets are met. Under the deal, Mitie will set up an exclusive partnership with CH&Co to provide a catering service to its existing clients. Mitie’s shares rose 1.6pc, or 2.6p, to 161.6p. Imperial Brands shares rose 1.1pc, or 22.5p, to 2111.5p, despite reports that a number of its biggest investors want parts of the company to be sold and board members sacked.
Four of the Gauloises and Davidoff-maker’s top 30 shareholders are said to be unhappy with the firm, whose share price has halved in the last three years.
Big tobacco giants are having to make drastic changes as smoking has fast-declined in the West, with many former smokers taking up vaping instead.