Ocado to target 2400p after Q4 trading statement?

Ocado has undeniably be a standout winner from the covid crisis which accelerated a trend to online shopping. Q4 trading update is keenly awaited as shares trade +82% YTD.

Charts (4)

Ocado is due to release a Q4 trading update on Thursday 10th December.

Covid has been generous to Ocado. Ocado has undeniably be a standout winner from the covid crisis which accelerated a trend to online shopping. 

As with all supermarkets sales surged back in the first lockdown. However, unlike other supermarkets which struggled to cope with surging online demand Ocado, the nation’s only dedicated online supermarket was able to scale up quickly, there were of course a few teething problems as delivery slots became scarce and a crash or two on the website but these were quickly overcome enabling the so called “Microsoft of retailing” to take advantage of the rapid change is shopping habits; habits which could well be here to stay.

Focus on M&S
When the update is released, attention will be firmly on how the tie up with Marks & Spencer is going. The joint venture has now completed three months and expectations are running high. Kantar data earlier in the week pointed to 38.3% growth over the last 12 week period compared to last year. The group forecasts a full year boost to revenue of $30 million by the end of 2021, in addition to a small hit to earnings.

More than one string to its bow
The trading statement could also provide additional insight into the technology side of the business. Ocado sells its unique warehouse technology to other international supermarket groups which has helped Ocado up its earnings expectation to £60 million FY up from £40 million just a few months ago. Since then it has also agreed to buy US Kindred Systems an AI systems developer for picking and packing and Haddington Dynamics a robotic arm maker as it continues to focus on advancing its tech systems.

Chart thoughts
Ocado’s share price is currently trading around 2200p, after having eased back from 2900p a 12 month high reached at the end of September. The stock trades below its 50 & 100 sma on the daily chart. Additionally, the 50 sma has crossed below the 100 sma painting a bearish signal. 
However, horizontal support at 2140p has proved to be strong across November with the price rebounding from here late last month. Should this level hold then we would look for a move above 2400 (100 sma) to negate the near-term bearish bias and signal a move higher toward 2650 (Nov high).
On the flip side a break-through 2140 could see the 200 sma being tested at 2046, which could signal the start of a more pronounced sell off.


More from Equities

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.