Ocado Shares (OCDO) Extend Declines, Financials Improving

Ocado shares (LON: OCDO) are trading down 4% today, extending a bearish trend that has held firm for the past 5 years. The latest decline comes amid heightened volatility in the UK retail sector and persistent investor concerns about the company’s path to sustainable profitability.

The drop builds on a recent downward trend, with Ocado’s share price falling over 20% since the start of 2025 and continuing a multi-year collapse that has erased more than 87% of its market capitalization in the past five years.

The broader context for the sell-off appears rooted in sector-wide pressures facing UK retailers, as well as lingering doubts about Ocado’s ability to achieve consistent profitability despite its technological advances. Comments from President Trump surrounding tariffs has also shaken markets this afternoon, with the FTSE 100 falling 1.41% in less than an hour on from his comments.

Despite the overall negative sentiment, there are some positive aspects to Ocado's business performance. The company's Technology Solutions business, which provides an IT platform to 13 retail partners globally, showed promising growth in FY24, as revenue for the division increased by 18.1% compared to FY23, reaching £496.5 million

The Ocado Smart Platform (OSP), described as an “end-to-end ecommerce, fulfilment and logistics solution,” utilizes advanced robotics and artificial intelligence to maximize operational efficiencies. The company currently operates 20 Customer Fulfillment Centers (CFCs) for its clients and has a pipeline of an additional 7 CFCs expected to be operational by FY27.

A notable improvement in Ocado's financial position is the £249 million improvement in free cash flow. While the company continues to invest heavily in its technology solutions, it appears to be moving closer to becoming cash flow positive by 2026. Additionally, with depreciation and amortization charges having peaked, the gap between Ocado's underlying earnings and reported earnings may begin to narrow.

The current consensus target for Ocado's share price sits at 289p, which would represent a ~13% increase from recent trading levels. This suggests that despite today's decline and the overall negative trend, some analysts believe there is potential for modest recovery in the stock.

Cost-saving initiatives and expected margin improvements from the Technology division could be key factors in potentially reversing Ocado's share price decline. However, investor sentiment remains cautious given the company's history of losses and the competitive pressures in both the online grocery and technology solutions markets.