Ocado share price set to climb even higher ahead of its Q1 earnings

Ocado is well-positioned to see its shares climb even further, with sales surging amid Covid-19 and interest in its tech platform rising from global retailers ahead of its half-year results next week.

The growth potential of its tech platform has helped the company exceed nearly all analysts’ expectations, with the stock up 61% year-to-date. Ocado closed at £20.31 per share on Friday.

The online grocery delivery platform will unveil its half-year results on Tuesday 14 July.

From September 2020, Ocado will end its 20-year partnership with Waitrose and enter a new relationship with Marks & Spencer, after the retailer acquired half of its grocery business in a deal valued at around £750 million.

Covid-19 has made online demand for groceries skyrocket, with the new joint venture with M&S capable of reaping major rewards for both parties if executed correctly and able pushing Ocado’s stock higher in the fourth quarter of 2020 to become one of the UK’s top tech stocks.

Licensing key to Ocado’s growth

Outside of Ocado’s joint venture deal with M&S and, arguably the key driver of its share price gains in 2020, is its digital grocery platform which it licenses several leading supermarkets from around the world, assisting them with their online sales, storage and distribution. This includes Morrisons in the UK, Groupe Casino in France, ICA in Sweden, Coles in Australia, Kroger in the US, Sobeys in Canada and Aeon in Japan.

Although it is still early days for Ocado’s tech business. The company still generates three times more revenue from its online grocery operation than its tech division, and it’s still loss-making overall.

Despite this, Ocado is becoming a vital partner for major retailers looking to automate and digitise their businesses and has plenty of room to grow considering its tech can be used by more industries than just groceries.

UK supermarkets sees online sales surge during lockdown

According to a recent report by Kantar, online grocery sales surged in the 12 weeks to 14 June, with the coronavirus pandemic accelerating a shift in shopping habits.

British supermarkets saw take-home sales increase by 13.7% year-on-year over the 12 week period, with revenue growth soaring 18.9% over the last four weeks.

‘Consumers are also contemplating their domestic budgets,’ Fraser McKevitt, head of retail and consumer insight at Kantar said.

‘Two thirds of shoppers are very concerned about the economic outlook for the rest of 2020, and efforts to tighten purse strings can already be seen in a preference among furloughed workers for budget, own-label lines and a move away from more premium products.’

Tesco had the highest market share of the multiples during the 12 weeks to 14 June, at 26.9%, compared to 27.3% a year earlier. Sainsbury's had a market share of 14.9%, Asda 13.9% and Morrisons 10.1%. Meanwhile, Aldi's market share was 7.5%, Waitrose was 4.8% and Iceland was 2.5%.

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