Ocado (LSE: OCDO) shares have been one of the worst performers in 2022. The stock has slumped nearly 50%, compared to just a 5% fall seen by the FTSE 100.

The shares have come under pressure in recent times. However, does this fall open an opportunity for me to add a bargain to my portfolio?

A rocky road for Ocado

The stock’s price has been on some journey over the past few years. With the Covid-19 pandemic taking full grip of our lives, the online grocer saw a boom in business as consumers were forced to take their shopping habits online. Its retail business saw a 35% jump in revenue for 2021. And during this booming period, its share price hit an all-time high of nearly 3,000p.

However, 2022 has told a different tale. Inflationary pressures have seen consumers batten down the hatches as rising rates have eaten away at incomes. And with grocery prices consequently rising, it’s clear to see Ocado has taken a hit. The firm has placed itself among the upper echelons of grocery retailers, having recently partnered with Marks & Spencer (and previously Waitrose). So as the popularity of budget retailers like Aldi and Lidl continues on an upward trend, the outlook for Ocado has turned sour.

Where next?

So, where does the business go from here?

Well, it recently raised £578m from investors as it looks to continue the rollout of its e-commerce technology. The group has taken large strides to expand its capabilities, including the creation of over 50 customer fulfilment centres across the world.

The firm charges third-party retailers to use its technology, so an increase in centres should come with a boost in Ocado’s revenues.

However, investors don’t seem to be convinced. The stock dropped 5% as the company issued new shares at a 9% discount. Ocado has failed to turn a profit despite heavy investments. And with this latest round of cash raising, it looks like market spectators fail to see a way out for the firm.

It has also expanded the territories it operates in recently, notably in France and Poland. This expansion opens new markets, which of course, could be a benefit for Ocado. However, with a lack of agreements in these regions, the outlook remains dire.

Ocado released a trading update back in May where it downgraded its full-year outlook. The business stated that the average basket value had fallen 9% year on year. And that sales had dropped 8% so far for the quarter. As such, the firm lowered its expected sales growth from the previous 10% to low single digits. Its half-year results are due this month, so it will be interesting to see how it has fared.

Why I’m not buying

The pandemic was key in highlighting that Ocado can succeed. And with the amount it’s pumped into its expansion, it could see this pay off over the long term. However, I’m not convinced. I struggle to see a way back for Ocado. And with a gruelling period ahead of them as costs continue to rise, I think the stock will lag. I won’t be buying Ocado shares any time soon.

The post Is now the time to buy cheap Ocado shares? appeared first on The Motley Fool UK.

More reading

• How UK investors can get access to the $2trn SpaceX stock IPO TODAY
• Down 23% from its highs, I’ve just bagged myself a FTSE 100 bargain!
• How to turn an empty ISA into £100 a month in passive income
• Down 23%! Should I buy Meta Platforms for my ISA or SIPP?
• £5,000 invested in Greggs shares 2 years ago is now worth…

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Ocado Group. 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.

Many shareholders continue to cling to the supermarket in spite of worsening conditions in the British grocery space. Indeed, latest Nielsen statistics showed sales at Lidl and Aldi up 16.7% and 16% in the 12 weeks to 26 March, a stark contrast to Tesco’s 0.1% revenues advance.

But the Cheshunt firm isn’t only being beaten by the low-price specialists — indeed, the 2.9% sales increase at Waitrose, and 4.2% rise over at Marks & Spencer during the three months to the end of March, illustrates the battle Tesco has on its hands to retain the more affluent members of its customer base.

Market share slides

On the one hand Tesco’s move back into the black should be greeted with some cheer. Not only did March’s release mark the fourth successive quarterly improvement, but this was also the supermarket’s best performance since November 2013.

Still, this couldn’t prevent Tesco’s market share from sliding further, to 27.4% from 27.8% a year earlier. And I believe Tesco is facing an uphill task to keep its dominance from evaporating further as its rivals rapidly expand.

According to Barbour ABI data compiled for The Telegraph, Aldi  lodged 101 planning applications last year for new supermarkets, while Lidl filed 48. By comparison Tesco lodged just seven applications, the company concentrating more on closing scores of underperforming mega- and convenience stores than expanding its retail base.

And Tesco faces an assault in the white-hot online segment, too. Morrisons has recently announced plans to team up with Amazon; Aldi has started selling wine to internet customers; and Sainsbury’s has recruited 150 new ‘digital’ employees to enhance its existing internet presence.

A pricey pick

Given this backcloth it comes as a surprise — well to me, at least — that the City expects Tesco to rise like the mythical phoenix from the flames in the months ahead.

Indeed, current consensus suggests that the supermarket will recover from a fifth consecutive earnings drop in the 12 months to February 2016, to 2.8p per share, with a bounce to 7.8p per share in the current fiscal year.

However, this forecast leaves Tesco changing hands on a P/E ratio of 27.2 times, a level that I don’t believe fairly reflects the grocer’s heightened risk profile.

Instead, I reckon the firm should be dealing on an earnings multiple of 10 times or below, terrain indicative of stocks with poor growth outlooks like Tesco.

A subsequent share price correction would leave Tesco changing hands at 78p per share, representing a whopping 55% discount from current levels around 175p.

And while Tesco may still be floating comfortably above these levels, I reckon the supermarket may find itself heading sharply lower should its market share continue to slip.

The post Could Tesco plc’s share price REALLY collapse by 55%? appeared first on The Motley Fool UK.

More reading

• Up just 1%: what’s going on with Tesco shares now?
• Under £5 now! Here’s why I think Tesco’s share price should be trading closer to £7
• £10,000 invested in red-hot Tesco shares just 1 week ago is now worth…
• How much would someone need in a Stocks and Shares ISA to target an annual income of £20,855?
• New to investing? Here’s how to use the stock market to try and generate a second income

Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon.com. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Supermarket scares

The share price of embattled grocer Sainsbury’s (LSE: SBRY) went on a fresh down-leg between last Monday and Friday, chalking up a 3% weekly decline. And I believe further weakness can be expected as competitive challenges steadily increase.

Just today, Morrisons announced it will sell its goods in the UK via Amazon’s online presence, a move that significantly boosts the American retailer’s foray into the British grocery space. In addition, Morrisons announced it was taking space in Ocado’s distribution hub in Erith, London, to bolster the geographical reach of its own online presence.

With Sainsbury’s already being battered by the relentless expansion of discounters Aldi and Lidl — not to mention premium outlets like Waitrose and Marks & Spencer — the City expects its earnings to fall 16% and 3% in the years to March 2016 and 2017 correspondingly.

And I believe even these insipid forecasts could be subject to further downgrades as the operating environment worsens, making even a low prospective P/E rating of 11.5 times unattractive value.

Recruit this growth great

Recruitment specialists Hays (LSE: HAS) also had a week to forget, the business shedding 7% of its value between last Monday and Friday.

Investor confidence took a knock following news that net fees at Hays edged just 3% higher between July and December, to £396.9m, although on a like-for-like basis this represented a chunky 8% advance. Pre-tax profits rose 7% to £82.4m during the period.

However, I believe stock pickers could be missing a trick here. Hays has worked hard to improve its global footprint in recent times, a strategy that I believe should deliver strong earnings improvements in the years ahead — indeed, the recruiter saw net fees rise by 10% or more across 17 of the countries it operates in during the first half.

The number crunchers expect Hays to enjoy earnings rises of 9% and 19% in the years to June 2016 and 2017 respectively, resulting in P/E multiples of 14.4 times and 12.1 times. I believe this represents very decent value given Hays’ great success on foreign shores.

A fashion favourite

Retail giant NEXT (LSE: NXT) also saw its share price dip during the course of last week, the stock chalking up a 3% decline during the period. Weak investor appetite pushed the business to its cheapest for 14 months earlier in February, but I believe this persistent weakness represents a dip-buying opportunity for savvy investors.

The huge investment in its NEXT Directory internet and catalogue division leaves the London business in great form to enjoy the fruits of surging home shopping in the years ahead, supported by a steady improvement in consumer spending power. And I reckon NEXT’s foray into foreign markets should reap excellent rewards once current turbulence in these regions abates.

The City expects NEXT to keep its exceptional growth record rolling with advances of 5% in the periods to January 2017 and 2018, resulting in decent P/E ratings of 15 times and 14.4 times correspondingly. And mammoth dividend yields of 6% for 2017 and 6.4% for 2018 seal the investment case, in my opinion.

The post Should You Buy Last Week’s Losers J Sainsbury plc, Hays plc & NEXT plc? appeared first on The Motley Fool UK.

More reading

• 2 FTSE 100 shares that could outperform this year regardless of geopolitics
• 1 FTSE 250 stock I like and 1 I’ll avoid after the stock market correction
• £5,000 invested in these 5 stocks 1 year ago is now worth £12,350
• Here’s why Next stock rose 5% and topped the FTSE 100 today
• Next impresses again, but could its shares be about to crash?

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Keep shopping around

The newsflow surrounding the grocery industry continues to make for grim reading for middle-ground operators like Sainsbury’s (LSE: SBRY).

Budget outlet Aldi this week made its first steps into the online sphere with the rollout of wine deliveries, a move that is expected to lead onto a full food delivery service in the coming months. The business is also ploughing vast sums up its store expansion programme along with fellow discounter Lidl to underpin its spectacular market share grab.

Elsewhere, premium outlet Waitrose also upped the ante in recent days by stepping up marketing of its ‘Pick Your Own Offers’ programme, a scheme that allows shoppers to pick 10 items on which they will receive a 20% discount.

It comes as little surprise that the City expects Sainsbury’s to endure sustained earnings falls right through to the end of fiscal 2017. And I believe the London firm could face further pain beyond this as Britain’s price wars steadily intensify.

Copper yet to bottom

As economic data from commodities glutton China looks set to continue to disappoint, I believe investors should also steer well clear of copper miner KAZ Minerals (LSE: KAZ).

The Kazakhstan-focussed producer is steadily increasing metal production to offset the impact of falling copper values, and first production from its Aktogay project was churned out in December. KAZ Minerals hopes the asset will create 105,000 tonnes each year for 10 years from 2017.

But the company is not the only major producer embarking on ambitious capacity-raising plans, a situation that is worsening the copper market’s rising imbalance. Should demand indicators continue to deteriorate and push metal prices even lower, I reckon KAZ Minerals could find itself in serious turmoil, particularly as it already finds itself nursing a colossal $1.85bn net debt pile.

Oil producer under pressure

But copper is not the only commodity on the back foot, of course. Brent crude values toppled to their lowest since 2003 this week below $28 per barrel, prompting the broker community to break out their red markers en masse. A fall to $20 per barrel is viewed by many as a nailed-on inevitability, and some analysts are even predicting a price as low as $10.

This comes as little surprise as global inventories bulge and output from OPEC, the US and Russia continues to gallop. Indeed, the International Energy Agency warned this week that the markets could “drown in oversupply,” commenting that global oversupply could ring in at 1.5 million barrels per day in the first half of 2016.

Against this backdrop I believe investors should give fossil fuel plays like Enquest (LSE: ENQ) an extremely wide berth. The explorer advised in December that net debt should clock in at $1.55bn as of the close of 2015, a figure which is expected to rise this year ahead of maiden oil at its ‘Kraken’ North Sea asset.

Given that weak oil prices also look set to keep revenues at Enquest firmly on the back foot for the foreseeable future, I reckon the London business is a risk too far for shrewd investors.

The post Shrewd Investors Need To Keep Selling J Sainsbury plc, KAZ Minerals PLC & Enquest Plc! appeared first on The Motley Fool UK.

More reading

• 2 FTSE 100 shares that could outperform this year regardless of geopolitics
• Could a stock market correction be good news for passive income?

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.