Ocado’s share price jumped over 40% this morning amid speculation it could be a takeover target for several technology heavyweights, including Amazon.
According to The Times, an American suitor is looking at an 800p-a-share takeover bid, with Goldman Sachs and JP Morgan acting for the bidders.
Ocado posted a half-a-billion loss last year after revenues in its retail division fell as shoppers returned to stores and made cutbacks amid the cost of living crisis. Shares in the firm had fallen over 75% since the end of 2021, after soaring previously as strong online demand during the Covid crisis and technology deals with overseas retailers boosted the firm’s credentials. Last month, Ocado narrowly clung on to its prized spot in the FTSE 100 ranking.
“The shares have been about as flat as an open bottle of lemonade since the pandemic but third parties, including reportedly Amazon, may still see value in the brand, technology and infrastructure,” said Danni Hewson, AJ Bell’s head of financial analysis.
“Ocado’s hopes of becoming an online groceries partner to businesses across the globe has only had limited success, and shareholders may be open to a bidder putting them out of their misery.”
Earlier this month, Ocado’s shares rose after analysts at BNP Paribas Exane switched their rating from ‘underperform’ to ‘neutral’, saying the company was entering a more “settled” phase after struggling to grow volume and excess capacity post-pandemic.
But the share price soured again earlier this week after JP Morgan and HSBC cut their target prices on the stock to 400p and 370p respectively.
JP Morgan told its clients that Ocado’s online grocery activities would continue to face “meaningful headwinds” in the coming months, while HSBC warned “the clock is ticking” for Ocado amid signs that the pathway towards growth is getting squeezed.
Following this morning’s surge, Ocado’s shares were trading at around 600p. The company has yet to comment.
NAM Implications:
- “Ocado’s hopes of becoming an online groceries partner to businesses across the globe has only had limited success”
- This may be a surprise to outsiders…
- Presuming Ocado would have bragged of progress to counteract pressures on Ocado retail…
- One way forward may be to try selling off retail…(at any price to M&S?)
- And focus on online tech…
