The Ocado Group (LSE: OCDO) share price has painted a pretty sad picture of late.
Over five years, it’s down more than 50%. But that hides a worse slump. Ocado flew high in 2020, seen as a shopping tech growth star. And since its peak that year, the price lost 80%.
But the Ocado share price just spiked up 25% in morning trading Thursday. So what’s happening. And does it mean there might be a new bull run on the cards?
Takeover bid?
It’s all about buyout speculation. The Times says US giant Amazon.com might have Ocado in its sights. Talk, it seems, is of a bid of around 800p per share. That would mark a premium of 85% over Wednesday’s close.
I think I can see why Amazon might be keen. Ocado was a big favourite during lockdown days. But now it’s out of favour, the shares are lower than they’ve been since 2018.
I can easily see room for consolidation in the industry. And if a firm had half an eye on a move for Ocado, it might just be a good time to go for it now.
What profit?
Profitability is still a problem, as Ocado recorded a pre-tax loss of £500m in 2022. Inflation didn’t help, but it was still worse than analysts had feared.
It wasn’t good news for Marks & Spencer either, with its joint venture with Ocado. The latest Ocado share price rise hasn’t, so far, had much effect on the M&S share price.
But profit might not matter too much for someone like Amazon right now.
I’d guess the US retail giant is more likely to be after Ocado’s warehouse and distribution network in the UK, its technology, and its market share. They could come, ready made, at a more attractive cost that Amazon going about its own expansion.
Only a rumour
I must stress that these are only rumours at the moment, as the newspaper made clear. There’s been nothing official from either party. And any assumption that a bid will go ahead could turn out to be way off base.
It can be dangerous buying shares in the hope of an approach. It burned Cineworld investors a while ago, who bought when they thought a ‘white knight’ might be about to save the day.
But that aside, are we at a turning point for one of the FTSE 100‘s biggest flops of 2023? And should we buy now?
Should we buy?
My take is that I’d never buy a stock in the hopes of a takeover. No, I’d only buy if I liked the look of a company with a view to owning it for at least the next 10 years.
The problem with a speculative buy like this is that I’ve seen too many fall through. The price rises on the rumour, you buy, there’s no bid, the price falls, you lose.
For now, I can see how Ocado might be a good buy for Amazon. But I don’t think it’s a good buy for me.
