Why invest in ocado

Despite this, I think it is heading for a fall. The first problem with Ocado is that it is not very good at actually making money.

It last turned a profit in and is forecast to increase its losses in ; analysts suggest that it may be before it starts generating cash. By contrast, traditional supermarkets such as J Sainsbury and Wm Morrison have still been able to make money this year, despite the extra costs associated with Covid As a result, despite its surge in sales, Ocado has lost market share in the online delivery sector this year.

The entry of Amazon into online delivery, in the form of Amazon Fresh, which is already available in certain parts of the UK, is another competitive threat that could not only erode market share further, but also drive down margins, making it even harder for Ocado to turn a consistent profit. With the core operations unprofitable, Ocado is now pinning its hopes on being able to sell its delivery technology to supermarkets around the world in exchange for royalties. But agreeing deals has proved a protracted process and their potential profitability is uncertain, especially as they involve large upfront investment in warehouses.

Nor is Ocado the only technology company in this field. It is also being sued in the US over possible patent infringement. Published 4 February Fidelity International Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest. It has been a good time to be one of the major supermarket chains and an even better one for those with an efficient online ordering and delivery system. A record-breaking 5.

While the big Christmas spend is usually the bumper time for the supermarkets, the party has continued into the new year. The latest figures from Kantar show that higher than normal sales of alcohol and kid-friendly snacks have helped boost supermarket sales in January, with take-home grocery sales up There is no doubt that Ocado and co are reaping the rewards of having a captive audience.

What happens when the vaccine rollout is complete, pubs and restaurants reopen and life returns to some semblance of normality as hoped for over the summer, remains to be seen. But almost one year on from the start of the pandemic in the UK, Kantar has identified some clear patterns in shopping habits.

Ocado at the helm of the most successful online grocery business is clearly not resting on its laurels. More on Ocado. Important information: Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Investors should note that the views expressed may no longer be current and may have already been acted upon.

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Simply click on the company's or index name highlighted in the article. We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication. Details of all recommendations issued by ii during the previous month period can be found here. Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests.

Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument s for a period before and for five working days after such publication. Our current OSP partnerships with global retail businesses looking to grow faster.

A flexible platform with best possible customer offer and economics. Our offer is perpetually evolving and applicable beyond grocery. Our Solutions make a real different for good. Latest operational highlights. We have successfully accelerated the build-out of more capacity for our operational partners, in the UK and internationally, in response to surging demand for online grocery in the face of Covid Latest strategic highlights.

Latest strategic highlights Our technology and engineering headcount now stands at over 2, The attractive growth outlook for the company and strong demand was reflected in the terms of each offering. Our evidence. And if not, you can always contact us. Financial results.