Ocado shares tumbled 5% after news that a Norwegian company was suing the online retailer over copyright infringement. The company is facing allegations that its automated warehouse technology is an infringement of Norwegian firm Autostore.
InvestingCube's S&R Levels
Not in Sell Zone
The Norwegian rival has filed lawsuits in the U.S. and U.K. seeking financial damages, which could end up being in the hundreds of millions of pounds. The lawsuit could also spell an end to Ocado’s paid partnerships which cover the rollout of the warehouse technology in question.
Autostore alleges that Ocado was a customer of theirs until 2012 and the Ocado Smart Platform copies its technology. Ocado denied knowledge of the lawsuit but said they would fight any claims.
Besides the cost implications of the lawsuit, there could also be a hit to the lucrative partnerships and delays, brought on by having to adapt their warehouse systems. The news is a blow for Ocado after it briefly passed Tesco as the most lucrative U.K. retailer. The company has been boosted by a move to online deliveries and the lockdowns associated with the coronavirus.
Ocado Technical Outlook
Ocado crashed through the support level I mentioned in a previous article. The share price has been supported by two channels that have run from mid-March. A bearish close today could see the stock move to the lower channel line support at around 2200p. The 50-day moving average is also around that level so this will be the first test for Ocado. A close below 2200p could see a bear move taking the stock lower to 1800p. The ATFX Q4 Market Outlook is now available for free download.