In a report released today, Luke Holbrook from Morgan Stanley reiterated a Sell rating on Ocado Group (OCDGF – Research Report), with a price target of p230.00.
Luke Holbrook has given his Sell rating due to a combination of factors affecting Ocado Group’s financial outlook. The company has revised its guidance for the deployment of customer fulfillment centers (CFCs), indicating a slower rollout than previously anticipated. For FY25, Ocado plans to deploy only five modules compared to the earlier guidance of ten, with some modules being pushed into the latter half of 2024. This slower deployment impacts the company’s growth prospects and delays the expected benefits from new CFCs.
Additionally, Ocado’s guidance for free cash flow (FCF) in FY25 shows a significant outflow, albeit slightly better than Morgan Stanley’s expectations due to reduced capital expenditures. However, the company’s projections for technology costs and R&D capex in the coming years suggest that reaching a break-even point may take longer than initially expected. These factors contribute to a cautious outlook on Ocado’s ability to achieve its financial targets, prompting the Sell rating.