Ocado shares spike as it boosts profit target by 50%

Online groceries retailer Ocado (LON:OCDO) posted positive earnings guidance on Monday and stated that demand has remained strong through the fourth quarter of the financial year.

This demand, it said, reflected the continued migration of consumers to online shopping channels, with this trend only set to continue as England and Wales re-enter lockdown for a month. The company added that sales were ‘in line’ with trends reported in Q3, though growth rates reflected the seasonality of the quarter.

The Group also said that trading at Ocado Retail Ltd, a joint venture between the parent company and Marks & Spencer Group (LON:MKS) has remained ‘strong’ through the fourth quarter of the financial year. With these considerations in mind, the company announced that it would increase its full-year earnings guidance, from £40 million, to £60 million.

On Monday, the company also announced that it had acquired Kindred Systems Inc, an advanced piece-picking robotics Group, for US$262 million. It has also acquired robotic-arm designer and manufacturer, Haddington Dynamics, for around US$25 million.

Ocado building for a strong finish

Speaking on the acquisitions that will help the company expand its capacity capabilities, Ocado CEO, Tim Steiner, commented:  

“We consider the opportunities for robotic manipulation solutions to be significant, both for Ocado Smart Platform clients and across the fast-growing online retail and logistics sectors. Ocado has made meaningful progress in developing the machine learning, computer vision and engineering systems required for the robotic picking solutions that are currently in production at our Customer Fulfilment Centre in Erith. Given the market opportunity we want to accelerate the development of our systems, including improving their speed, accuracy, product range and economics.”

“I am delighted to be welcoming Kindred Systems and Haddington Dynamics to the Ocado group, as we believe they have the capabilities to allow us to accelerate delivery, innovate more, and grow faster. I am also excited by the opportunity to enter new markets for robotic solutions outside of grocery that is demonstrated by Kindred Systems’ robust growth, with existing customers such as Gap and American Eagle across the general merchandise and logistics sectors. 

Investor notes

Following the announcement, the company’s shares jumped by over 10%, to 2,511.00p on Monday 02/11/20. The company’s current level is currently 28% ahead of its target price of 1,791.77, though short of its year-to-date high of 2,895.00p.

Analysts currently have a ‘Hold’ stance on the stock, while the Marketbeat community has a 58.94% ‘Underperform’ rating for the company.

Ocado stated that its Q4 update will be delivered on December 10, with results for the full-year ended November 30 being published on February 9 2021. M&S is due to report interim results for the 26 weeks to the 20th of September on the 4th of November.