Ocado’s shares were up 50 per cent this year as shoppers turned to online shopping during the coronavirus crisis
The recent boom in online grocery sales will bring long-term gains for Ocado, Berenberg analysts believe.
Ocado has been one of the few winners on the stock market during the recent rout – with shares up 50 per cent so far this year – as shoppers shunned stores and turned to deliveries amid the coronavirus pandemic.
Although sales have risen at rival grocers, store-based supermarkets have also seen their costs spiral. Berenberg brokers note a lot of these extra costs come from hiring extra people to manually pick out and sort the items people have ordered for deliveries.
Berenberg believes ‘grocers internationally will recognise this’ and more deals for the hi-tech warehouses will come from both new and existing customers, which so far include the likes of Kroger in the US and Groupe Casino in France. Analysts reckon there could be hundreds more of these orders to come.
They have upped their target price on Ocado’s shares from 1725p to 2225p, and kept a ‘buy’ rating on its stock, which is their top pick in the sector.
Shares in the FTSE 100 group rose 2.7 per cent, or 50.5p, to 1914.5p. Elsewhere, brokers at Peel Hunt took kindly to events and exhibitions organiser Hyve Group.
The FTSE 250-listed firm has had the opposite experience to Ocado, losing 84 per cent of its value this year as the coronavirus outbreak brought travel and industry networking shindigs to a grinding halt.
Peel Hunt believes plans for a £126m rights issue – which shareholders will vote on in the coming weeks – shows that the company ‘has a route for survival’. Brokers believe it will return to profit next year and have raised its rating from ‘hold’ to ‘buy’. But investors shrugged off the optimistic note, sending shares down 12.7 per cent, or 2.38p, to 16.4p.
The wider stock market managed to start the week on the front foot, though only just, as the FTSE 100 rose 0.06 per cent, or 3.75 points, to close at 5939.73. And the FTSE250 rose 0.14 per cent, or 23.55 points, to 16,271.49.
Shares were held back from making stronger gains by worries that gradually easing the lockdown could trigger a second wave of Covid-19 infections.
In Germany, the Dax fell 0.7 per cent as the country’s ‘R’ rate of infections rose to 1.1 – a level that means each person with the disease will pass it on to 1.1 others and could stymie attempts to a further relax restrictions.
Airline stocks were knocked by plans to quarantine visitors to the UK for two weeks upon arrival, piling more pressure on the already battered aviation industry.
On the Footsie, Easyjet shares fell 5.9 per cent, or 31.4p, to 500p, while British Airlines-owner IAG shed 2.9 per cent, or 5.5p, to 184.95p and budget flyer Ryanair lost 4.2 per cent, or 39 cents, to €8.86. Centrica shares sank 8.8 per cent, or 3.52p, to 36.39p, though the drop appeared to be unrelated to any corporate news.
Shares in Aston Martin, edged 4.9 per cent lower, or 2.2p, to 43.1p ahead of its first-quarter results, which will be unveiled on Wednesday and will be the first major update since the luxury car maker was saved by Canadian billionaire Lawrence Stroll.
Over on AIM, Cake Box struck the right note with investors, rising 0.7 per cent, or 1p, to 153.5p.
Some of the egg-free cake maker’s franchised stores have begun offering their services on online delivery platforms.
