After falling 25% in a month is this mind-blowing FTSE 250 stock in deep value territory?

Harvey Jones thought FTSE 250-listed growth stock Ocado Group looked good value when he bought it in July. It’s even cheaper today. Time to buy more?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I bought Ocado Group (LSE: OCDO) in a fit of inspiration in July, but with the FTSE 250 stock crashing 25% this month it looks more like a fit of madness. 

Or rather, a double fit of madness, because I bought the shares twice, on the 22 July and again four days later. So far, I’m down 17.29%.

Created with Highcharts 11.4.3Ocado Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

I can hardly complain. I knew the online grocer and food logistics group was a high-risk stock when I bought it.

Should you invest £1,000 in Nordic American Tankers Limited right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Nordic American Tankers Limited made the list?

See the 6 stocks

Ocado is a recovery play

The Ocado share price has plunged 88% since peaking at 2,808p in February 2021. I still think it’s been harshly treated by markets, but I seem to be in a shrinking minority.

I thought sentiment might pick up as it edges closer to profitability, but we’re not there yet. Ocado continues to lose money hand over fist as it pours funds into building the business, posting a pre-tax loss of £403.2m in 2023. Revenues are steadily rising but nowhere near fast enough, as my table shows.

Year ending20192020202120222023
Revenue£1.756bn£2.331bn£2.498bn£2.517bn£2.825bn
Pre-tax profits-£214.5m-£52.3m-£176.9m-£500.8m-£403.2m

On 16 July, Ocado shares soared 18% on news that it had slashed its interim six-month pre-tax loss from £289.5m to £154m.

They jumped again on 22 July when the board announced that US grocery giant Kroger had ordered more Ocado kit for its customer fulfilment centres. This followed a similar move by Japan’s AEON.

Ocado’s shares remain the plaything of wider economic sentiment. When investors are bullish, they pile in. When nervous, they flee in a disorderly rush. I was nicely ahead until the 5 August global stock market crash.

Given its volatility, I could easily recover my losses following a single positive set of results. So I’m not too disheartened. We got some good news on 27 August, when the board announced two customer fulfilment centres (CFCs) in Australia were finally operating after a two-year delay. They’re part of its partnership with local grocer Coles. That lifts the global total to 25.

It could either crash or soar

Its high-tech CFCs are mind blowing. They’re powered by the automated Ocado Smart Platform, which CEO Tim Steiner says boosts freshness and speed. If only they could add some freshness and speed to the share price, too.

With 13 of the world’s biggest grocers on board, I still think there’s a terrific opportunity here. Judging by the group’s return on equity, it will remain a case of one step forward, two steps back, though. Let’s see what the charts say.


Chart by TradingView

I bought Ocado as a long-term play and I’ll stick with it. The 12 analysts following this stock have set a median price target of 425p. That suggests 25% uplift from today’s 340p but here’s the thing. The range is huge, from a high of 2,900p to a low of just 230p. I think that tells us everything we need to know about its prospects.

I still think there is plenty of value here, but Ocado remains a binary play. It could go either way. I might play the dip by investing another £1k, but any more would be madness.

Should you buy Nordic American Tankers Limited now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has positions in Ocado Group Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Dividend Shares

2 ‘safe’ LSE dividend stocks to consider as global markets sell off

As global markets experience high levels of volatility due to economic uncertainty, investors are piling into these ‘safe-haven’ dividend stocks.

Read more »

Investing Articles

US stock market rout: an unmissable opportunity for investors?

His tech-heavy portfolio has been smashed by Trump’s tariffs. However, Dr James Fox believes there could be some opportunities in…

Read more »

Investing Articles

After a 13% ‘Trump tariff’ fall, is the Barclays share price too cheap to miss?

Does the Barclays share price fall mean we should all panic and run screaming from the stock market? Nah, of…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

2 investment trusts to consider for a Stocks and Shares ISA

These two investment trusts have a different focus -- but our writer sees both as worth considering, one more for…

Read more »

Investing Articles

Deutsche Bank reiterates Buy rating on 9.6% yielding FTSE 250 stock that was “most shorted in UK”

Our writer investigates why a major broker remains optimistic about a FTSE 250 stock that was once the most shorted…

Read more »

Investing Articles

2 things to remember when stock markets are turbulent

US trade policy has rattled the stock markets in New York, London and elsewhere. Our writer outlines a couple of…

Read more »

Investing Articles

Are Trump’s tariffs a once-in-a-lifetime chance for ISA investors to get rich?

The £20,000 Stocks and Shares ISA limit will reset on 6 April. Smart investors could use current market volatility to…

Read more »

Investing Articles

Here are the latest Persimmon share price and dividend forecasts

Our writer looks at the latest forecasts for the Persimmon share price and considers what level of dividend the stock…

Read more »