Ocado Share Price Break and Retest Points to More Trouble

The Ocado share price is continuing its fall from grace as the company’s growth and costs rise. The OCDO stock is trading at 1,266p, about 56% below its all-time high. It has crashed by almost 20% this year, making it one of the worst performers in the FTSE 100 index. Its market cap has crashed to about 9.83 billion pounds.

Ocado was once a favorite stock among London’s growth investors. As a result, they pushed the company’s stock to an all-time high of 2,925p in 2020 and 2021. Recently, however, the stock is not finding buyers as concerns about the company’s business model and lack of profitability.

Ocado latest news

The most recent sell-off was triggered by the company’s weak earnings in which the management warned about the cost of international expansion. The firm said that it will boost its capital expenditure to about 800 million pounds in a bid to meet growth expectations. For what was billed as a growth company, Ocado has failed to benefit in a time when e-commerce is seeing a strong performance. For example, in 2021, Ocado had total revenue of 2.5 billion, which was just a 7.2% increase from 2020. 

Most of these results came from Ocado Retail, its joint venture with Marks and Spencer. The rest came from its technology division, in which it builds and operates automatic warehouses for companies. Notably, Ocado’s growth was slower than that of Sainsbury’s, Ocado is facing other challenges. Its delivery costs are rising in line with energy prices while it is struggling to find workers. Therefore, its lack of solid profits will continue making its stock unattractive.

Ocado share price forecast

The daily chart shows that the Ocado stock price has done a break and retest pattern. It did this when it moved below the descending channel and then retested its lower side. In price action analysis, this pattern is usually an indication that the initial breakout will continue. 

The stock remains below the 25-day and 50-day moving averages, meaning that there is a possibility it will continue falling in the near term. The next target for the stock is at the year-to-date low of 1,140p.

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