Ocado Share Price August Forecast: Towards a 20% Dip

The Ocado share price has been under pressure lately. The stock declined to 1,800p, which was about 38% below the highest level this year. This brings the company’s market capitalization to more than 13.5 billion pounds. In July, the shares declined by more than 10%, becoming one of the worst performers in the FTSE 100.

Ocado has lagged

Ocado is a popular e-commerce and technology company headquartered in the UK. The firm makes money in two main ways. First, it provides its warehouse and logistics solutions to other retailers. Its most important deal is with Kroger, the biggest grocery chain in the US. Second, the firm makes money through its joint venture with Marks & Spencer.

Ocado operates a high-expense business since it needs to spend millions of dollars in building and automating the logistics business. As a result, the firm has not made any substantial profits in the past decade. Still, investors love it because they believe that these investments will pay for themselves later on. 

Data compiled by SeekingAlpha shows that the firm has only had one profitable year since 2016. It made a profit of $15 million in 2016 followed by substantial losses. It made a $23 million loss in the first half of the year.

The Ocado share price has struggled recently for three main reasons. First, the company suffered two fires recently, which had some impacts on its business. Second, investors are concerned about its lack of profitability. Third, there are worries that e-commerce sales will lag in the near term as the UK economy reopens. 

Ocado share price forecast

The daily chart shows that the OCDO share price formed a double-top pattern at the 2,910 level. The first top was in November while the second one was in February. 

The neckline of this pattern was at 2,130p. Today, the stock remains below the 25-day and 50-day moving averages. It has also formed what looks like a descending triangle pattern. In price action, the descending triangle is usually a bearish pattern. It is also slightly above the 61.8% Fibonacci retracement level. 

Therefore, the stock will likely keep falling in August as bears target the 78.6% retracement at 1,4010p. This price is about 20% below the current level. This view will be invalidated if the price moves above 2,130p.

Ocado Share Price