The Ocado share price is up 23% in a month! But I’d still avoid it like the plague!

Even though the Ocado share price has risen more than 20% over the past four weeks, our writer explains why he wants nothing to do with the stock.

| 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: Ocado Group plc

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.

The Ocado Group (LSE:OCDO) share price has been one of the better performers on the FTSE 250 in recent weeks. Since 12 September, it’s risen by 23%, making it the sixth best of all the stocks in the UK’s second tier of listed companies.

Created with Highcharts 11.4.3Ocado Group Plc PriceZoom1M3M6MYTD1Y5Y10YALL12 Oct 20194 Apr 2025Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '25202020202021202120222022202320232024202420252025www.fool.co.uk

Green shoots?

Investors appear to be impressed by the company’s results for the 26 weeks ended 2 June 2024 (H1 FY24).

These disclose a 12.6% increase in revenue and a significant reduction in losses, compared to the same period in FY23. And the encouraging performance continued into the third quarter, leading to a revenue upgrade for the full year.

Should you invest £1,000 in Ocado 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 Ocado made the list?

See the 6 stocks

Shareholders will be relieved to hear that the company’s directors believe that the group now has a “clear roadmap” to “turn cash flow positive during FY26”.

According to Kantar, the company’s joint venture with Marks & Spencer now has a 1.8% share of the grocery market in Great Britain. The company describes itself as the “fastest growing grocery retail channel”.

Cutting edge

This growth is underpinned by the group’s impressive technology.

Its videos on YouTube give an interesting insight into how it uses sophisticated robots to satisfy customer orders. Presently, it operates 22 customer fulfilment centres (CFCs) around the world.

And the videos showcase some of the clever solutions that the group can offer other retailers. It hopes to licence its Ocado Smart Platform (OSP) to third parties. At the moment, it has 13 OSP partners.

I admit this all sounds very positive. So why don’t I want a piece of the action?

Let me explain.

On the flip side

Ocado has a long history of over-promising and under-delivering.

Without any sense of irony, the company’s 2022 annual report stated: “We are just getting started on our growth journey in grocery and beyond”.

Remember, this is a company that’s been around since 2000. And it’s only reported a post-tax profit during three of those years.

Being charitable, its revenue was 12.2% higher in FY24 than in FY23. And its post-tax loss was £94m better. After all this time, perhaps the company has turned the corner? But I’m not so sure.

When it started, its online offering was different. Now everyone’s doing it.

And its persistent losses have taken a toll on the company’s balance sheet. At 3 December 2023, its borrowings, including lease liabilities, were £1.96bn.

It looks to me as though it will be able to get through to FY26 without having to ask shareholders for more money or raise more debt. However, a rights issue cannot be ruled out if its losses persist or the timescale of its anticipated recovery slips. It already has 50% more shares in issue than when it first listed.

I also fear that it’s going to take a lot of cash to continually replace and improve its technology.

Not for me

But despite my concerns, it still has some loyal shareholders. Its market cap is currently (11 October) £3.35bn, which is impressive for a company that’s been around so long and is still losing money.

However, I’m not interested in taking a stake. It’s just too risky for me. I believe there are many better opportunities elsewhere. There are numerous profitable companies — paying generous dividends — that I’d rather invest in.

Passive income stocks: our picks

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

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.

James Beard has no position in any of the shares mentioned. 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.

More on Investing Articles

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 »

British Pennies on a Pound Note
Investing Articles

Up 900%, could penny share Kodal Minerals have further to run?

Over five years, this penny share has increased in value by a factor of 10. Could the latest news persuade…

Read more »