#SaxoStrats: Ocado looking tasty
Ocado shares are down 41% since their peak in July as sentiment has eased on a lack of revenue growth acceleration and steep valuation premium to traditional UK supermarkets. Ocado dominates the UK online grocery market and is the best in class. The Ocado Smart Platform provides the company with the industry’s highest cash flow return to assets and it is working with potential international partners to lease its platform, potentially providing a new high margin business. Ocado surprised on Q1 retail gross revenue which will change sentiment and valuation over the coming quarters. In addition we believe Ocado is a story about expanding margins which will further support the rise of its share price.
Buy Ocado shares (OCDO:xlon) at market with a trailing stop - the stop price is set at 219 (volatility based) with step size of 6. Our target is 350.
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