Ocado share price is down by more than 1.45%, becoming one of the worst performers in the FTSE 100 index. The company is trading at 2,488p, which is a few points below its all-time high of 2,587. Other worst-performers in the FTSE are BHP, Admiral Group, and Next PLC.
Ocado shares have been in a strong upward trend this year. They have risen by almost 100% this year and by more than 120% in the past six months. It is easy to explain why the shares have been in a strong trend. First, because of the coronavirus pandemic and the ensuing lockdowns, more people have been shopping online. That has seen the company’s revenue jump sharply in the past two quarters.
Second, the pandemic has pushed investors into the so-called new economy companies. This includes companies like Zoom Video, Slack Communications, Amazon, and PayPal. They believe that these companies will see significant demand in the future.
Third, low interest rates in the UK and other countries have helped push Ocado share price higher. When rates are low, investors tend to look for other avenues to pack their money.
As a result of all this, investors have put valuations at bay. For example, in the United States, the market capitalisation of Apple has jumped to more than $2.3 trillion. This makes the company more valuable than all companies in the FTSE 100. Similarly, a company like Zoom Video is now valued at more than $120 billion despite the fact that it has less than $1 billion in annual revenue. Similarly, Ocado a loss-making company, which had more than £1.7 billion in revenue in 2019 is now valued at more than £18 billion.
So, is Ocado a buy? Analysts at Citi believe that the new relationship between the firm and Marks and Spencer is a positive catalyst for the company. They now expect the shares to jump to 2,900p, a 15% premium from the current price. They said:
“[Ocado Retail] should allow a wider range of customers to reappraise the M&S offer in terms of breadth of range, relative price and quality in addition to delivering volume synergies.”
It is worth noting that Ocado shares have recently moved above what most analysts were expecting. For example, Bank of America analysts had a target of 2,230p while those at RBC had a target of 1,350.
Ocado share price analysis
The daily chart shows that Ocado share price has been in a strong upward trend in recent months. Yesterday, it rose to an all-time high of 2,575, which is above all moving averages. The price seems to have found some resistance at the yesterday’s high. It is also above the ascending trend line that is shown in black. A closer look also shows that the pair is forming an ascending triangle.
Therefore, with interest rates this low, I suspect that the price will continue rising. On the flipside, a move below the important support at 2,253p will invalidate this trend.
Ocado Share Price Technical Chart