Some things are fairly easy to put a value on, but others are a lot harder. I put the Ocado (LSE: OCDO) share price firmly in the latter category.
Ocado came to market via its initial public offering (IPO) as long ago as 2010.
I expect those who bought some shares back then expected to see some sustainable profit by now. But they’ll have been disappointed, with further annual losses on the forecasters’ cards at least until 2026.
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Boom and bust
And just look at what happened to the share price. It went through the roof and came close to £30 in 2020 and 2021. But at that time, investors were going it like Covid had killed bricks-and-mortar shops for good, and Ocado would soon sew up the entire food retail business.
Of course, nothing like that happened, and the price deflated again. At the time of writing, it’s at 439p, and the stock is down in the FTSE 250.
What next?
But with all this doom and despair, what might happend to the Ocado share price by the end of 2024?
The City analysts are fairly evenly divided on the question, even a bit bearish overall.
But, you know, I wonder if it might be time to be a bit of a contrarian?
I think it’s fair to say that the pandemic and its aftermath helped throw the Ocado plans off course. But now we’re over it, we should have a clearer view of how the long-term online groceries business is likely to go.
Customer base
With H1 results on 16 July, CEO Tim Steiner pointed out that Ocado already supports “thirteen of the world’s leading grocers to grow their online business with our technology“.
And speaking of getting back into its long-term groove, he added: “The global channel shift to online has now resumed and Ocado is uniquely well positioned to take advantage of the opportunity.”
The financial bottom line still might not make great reading, but I’d say it’s actually better than it seems. We’re still looking at losses, but they’re decreasing. The first half this year saw a £154m loss before tax, down close to half from the £290m recorded a year previously.
I expect the Ocado share price to remain volatile for a long time yet. So I’d say there’s a big risk of short-term losses.
Forecast profit?
Brokers see Ocado’s revenue rising steadily in the next few years. And EBITDA is positive and looks set to grow well, with bottom-line losses continuing to decrease.
There’s one thing I don’t like, though, and I fear it might throw everything off track. Interest payments look set to climb in the next few years. Need to keep an eye on that.
I reckon the first time we see a profit on the forecasters’ horizon, the Ocado share price might just take off. If we see a profit on the forecasters’ horizon, that is.
Still, with investors looking like they fancy a bit of growth risk again, I think Ocado could end 2024 ahead.
