Ocado (LSE: OCDO) shares are going gangbusters. The UK stock market is flying, but Ocado’s success is on a different scale. Is 2026 the year it finally fulfils its potential and makes investors rich?
I hold Ocado shares myself, so I’m loving this moment. But I’m also wary. The FTSE 250-listed grocery tech specialist has a history of extreme volatility. It boomed during the pandemic, when the nation was locked down and food delivery orders were flying, but it’s been mostly downhill since. Until now.
Five years ago, investors were crazy for its robot warehouse technology. Its state-of-the-art customer fulfilment centres (CFCs) wowed supermarkets around the world, notably Kroger in the US, but also in Sweden, Japan and beyond.
FTSE 250 recovery star
There was a problem though. CEO Tim Steiner was pouring money into his beloved bots, but the returns weren’t coming fast enough. The company was years away from turning a profit while debts rolled up. When inflation took off, servicing those debts became even more expensive, and investors fled. The shares crashed more than 90%, peak to trough.
Last year brought another brutal blow, as Kroger scaled down its CFC commitment, in what some feared would be a death knell for the tech. Since then, the good news has started to trickle in. On 5 December, it agreed to pay Ocado $350m in compensation, which should come in handy. Kroger will also continue running centres in high-volume hubs in Ohio, Texas, Georgia, Colorado and Michigan.
Ocado’s overlooked online grocery joint venture with Marks & Spencer is also doing nicely. Sales surged 15.8% in the 12 weeks to 30 November, Worldpanel data showed, well ahead of second-placed Lidl at 10.2% and big gun Tesco at 4.7%.
Free cash starts flowing
The Ocado share price got another boost on 30 December when the board ended mutual exclusivity with retailers in most of its markets, including the US. This opens up new growth opportunities. Then yesterday (6 January), JPMorgan gave the shares a further kick by placing Ocado on its “positive catalyst watch”, citing its improving balance sheet. It expects good news on free cash flow at full-year results on 26 February. Margins look brighter too. Shares jumped 10% that day. They’re up another 4% this morning.
In total they’ve skyrocketed 46% in the last month, which would have turned a £10,000 investment into £14,584. But let’s not get carried away. The vast majority of investors are still nursing big losses, including me. Despite that jump, the Ocado share price is down 89% over five years. That’s the problem with losing money. It takes a lot of growth to claw it back.
This stock is still too risky for most investors. For those willing to take a punt, I’d urge them to sleep on it. I’ve seen spikes in the Ocado share price before, and they’re often followed by a quick retreat. I do think the shares might be worth considering with a long-term view, but only for investors who understand the risks and can afford to take the chance. They could deliver outsized rewards, but strong nerves are essential.
