Key points:
- JPMorgan downgraded Ocado shares
- The move follows the company's Lotte Shopping collaboration announcement
- Ocado shares are down 61% YTD
Despite Ocado (LON: OCDO) giving investors something to cheer about this week in its deal with Lotte Shopping, JPMorgan analyst Marcus Diebel still needs to see more from the company.
Ocado announced on Tuesday that it has signed a partnership with Lotte Shopping to help develop the Korean retail firm’s online business in South Korea with the Ocado Smart Platform, sending its share price 38% higher.
However, on Wednesday, JPMorgan analyst Marcus Diebel downgraded Ocado Group to Underweight from Neutral with a 500p price target. The analyst told investors in a note that for Ocado to justify its current valuation, it still needs to sign a dozen or so deals around a similar size.
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Based on its Tuesday closing price, Diebel said, “an additional 78 incremental CFCs (customer fulfilment centres) are required.” However, he believes the rollout of the customer fulfilment centers will remain slow and that the stock's risk/reward is “unattractive relative to other European internet names.”
JPMorgan lowered its price target on Ocado to 500p per share in mid-October. Its current negative sentiment on Ocado is shared by Morgan Stanley, which cut its price target on Ocado shares to 420p from 595p on October 7, maintaining an Underweight rating on the stock.
Meanwhile, in September, HSBC downgraded Ocado shares to Reduce from Hold with a 575p price target.
According to TipRanks, out of 10 analysts, three have Buy ratings on Ocado, two have Hold ratings, and five have a Sell rating on the stock.
So far, in 2022, Ocado shares are down 61%.