The Ocado (LSE: OCDO) share price can test the nerve of the toughest investors. The FTSE 250 online supermarket and technology group is down 22% over one year and 90% over five as it continues pouring vast sums into its robotic warehouse technology without securing the customer deals to justify that investment.
When good news lands, Ocado shares can surge. When bad news hits, as it all too often does, the punishment is brutal.
The most recent blow came from US partner Kroger scaling back automated warehouse deployments. That sends an uncomfortable signal to other potential customers. CEO Tim Steiner remains a firm believer in Ocado’s state-of-the-art technology. Investors need more convincing. Will they be convinced on Thursday (26 February) when Ocado publishes full-year 2025 results?
Volatile FTSE 250 stock
Whatever happens, I expect a sharp move in the shares. Volatility is now standard whenever Ocado reports. Sometimes, the shares go bananas.
On 17 July last year, the stock jumped 13% after half-year results showed group revenue rising 13.2% to £674m and adjusted EBITDA earnings soaring 77% to £91.8m. Ocado even swung to a statutory profit of £611.8m, compared with a £153.3m loss a year earlier.
Ocado Retail, its 50/50 joint venture with Marks & Spencer, posted a 16.3% rise in revenue to £1.52bn. So the underlying business isn’t quite as bleak as the share price suggests.
What investors really want now is clear progress on cash generation. Cash outflows have been narrowing, from £201m in H1 2024 to £108m a year later. Steiner says Ocado’s priority is to become cash-flow-positive in full-year 2026. If Thursday’s update shows stronger-than-expected progress towards that goal, investors could finally have something concrete to cling to.
They’ll scrutinise revenue growth, margins and cash flow across both Technology Solutions and Ocado Retail, searching for signs of sustainable, profitable growth. Any positive news on warehouse rollouts would be warmly received, but I’m not holding my breath.
Ocado has been cutting jobs and costs to stem losses and improve cash flow. But there’s always a risk that trimming too aggressively undermines its technological edge.
A big day for investors
It’s rare for one set of results to feel make-or-break. But shell-shocked investors are desperate for evidence that the long-promised turning point is real. I’ve seen plenty of one-day spikes over the past few years, only for the shares to drift back as investors take advantage of the bounce to exit their position and get on with their lives.
There are major potential risks this week. Any bad news on warehouse rollouts is the biggest. Continued losses or disappointing cash-flow commentary would quickly dent confidence. The M&S joint venture looks like the steadier long-term growth engine, but investors will want reassurance here too.
Thursday 26 February does feel like judgement day. Then again, it often does with Ocado. Investors might finally have something to celebrate. But I don’t think the shares are worth considering today and believe Ocado is best observed from a safe distance.
