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The Ocado share price is down over 60% in a year – is it time to buy?

It’s fair to say that the share price of Ocado, the UK-based online groceries shopping and warehouse technology growth stock, has taken…
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It’s fair to say that the share price of Ocado, the UK-based online groceries shopping and warehouse technology growth stock, has taken a battering over the past couple of years. The company has lost 85% of its market capitalisation since its most recent high in early 2021 and is down around 62% in the past 12 months. The share price has declined 35% in the less than 4 months since the beginning of 2023.

The company’s valuation was undeniably inflated during the Covid-19 pandemic when online groceries shopping with home delivery surged in popularity, especially during lockdown periods. A typical ‘Covid stock’ alongside companies like online conferencing tool Zoom and the upmarket exercise bike and fitness class streaming company Peloton, Ocado’s share price was perhaps always destined for a bruising return to earth when it became apparent pandemic trends wouldn’t hold in the post-Covid era.

But Ocado’s business and valuation had been on an upwards trajectory before the Covid pandemic. The company had always struggled to justify its valuation based on the slim pickings of the low margin online groceries sector it helped introduce to the UK market. However, its newer warehouse automation technologies business was showing promise.

Ocado invested heavily in developing proprietary warehouse automation robotics and systems via its Ocado Smart Platform unit. A flurry of deals to build and operate warehouses for some of the world’s biggest supermarket chains followed from 2017-2020, including with France’s Casino Group, Kroger, the USA’s second largest groceries retailer, Canada’s Sobeys and Cole Group in Australia.

Those deals sparked optimism that the Ocado Smart Platform would become the part of the business that would spark growth and finally lead to sustainable profitability. As a result, the Ocado share price gained almost 480% between mid-November 2017 and April 2019. After a period of trading within a relatively tight range just below that late 2019 high, Covid struck and the company’s valuation leapt again, more than doubling between a Covid sell-off low in February 2020 and September that same year.

Those September 2020 heights were nearly touched again in early 2021 but the picture since has been one of almost uninterrupted gloom.

ocado group plc

Ocado is now again worth roughly what it was at the beginning of 2018, five years ago. But since then it has seen significant growth in its Ocado Smart Platform business and the online groceries shopping market is worth more than it was pre-Covid, even if less of the sector’s pandemic gains were retained than many expected.

Has Ocado possibly now been oversold and worthy of closer inspection by investors again? Or has a business that has always attracted scepticism about its potential for sustainable profitably simply seen its share price return to fair value after the bursting of a growth stocks bubble?

Why has the Ocado share price dropped so much?

The consistent decline in Ocado’s share price over the past couple of years can be connected back to a combination of a shift in investor attitudes and the company failing to kick on quickly enough after inking its early flurry of Smart Platform partnerships.

As a company, Ocado has always put the emphasis on the future and asked investors to show patience while it invested in establishing a leading market position in online groceries retail – the sector’s fastest growing channel.

When Ocado published its full year results for 2022 in late February, the company again tried to emphasise the growing market it is a major player in, stating of the online groceries segment:

“Online market share has stabilised at materially higher levels following the pandemic [and is more than] 50% higher in the top 20 markets worldwide.”

“Industry data forecasts widespread and continued channel growth. For example, Edge Ascential expects online market share in the top 20 markets, globally, to grow by 30% through 2027.”

Investors, however, are now demanding Ocado starts to show returns sooner rather than later, starting by stemming its huge losses. 2022 saw a pre-tax loss of £501 million. That was not only a huge leap on the £177 million loss recorded in 2021 but also well ahead of analysts’ expectations for £429 million.

More significantly, recent losses form part of a consistent trend. Ocado lost £52.3 million before tax in 2020 and £214.5 million in 2019. 2018 resulted in a £44.4 million deficit.

The structure of its warehouse deals with international supermarket chains always meant that Ocado would have to absorb significant upfront costs before the new revenue stream would start to flow.

The biggest criticism being aimed at Ocado is now the consistency with which it misses financial performance estimates. And not only those of fully independent market analysts but even of its own house brokers, which should theoretically have additional insight.

Ocado’s 2022 losses were accumulated by costs, up 16.5% to £1.2 billion, rising much fast than sales, up just 0.6% to £2.5 billion. There was also £349 million of accounting charges and an almost 14% rise in the cost of the company financing its debt.

However, the biggest worry is now the performance of the company’s UK-focused Ocado Retail partnership with Marks & Spencer. Ocado Retail’s sales fell 3.8% last year to £2.2 billion, which was blamed on the move out of pandemic conditions and the impact of the UK’s cost of living crisis, brought about by decades-high inflation levels.

The silver lining in Ocado’s 2022 results was that the retail business’s total number of active customers grew 13% to 940,000 and the average number of weekly orders placed also showed reasonable growth, up 5.6% to 377,000. Unfortunately, the size of the average order dropped 8.5% to £118, which dragged overall turnover down.

International Solutions, the business unit that sells the Ocado Global Platform into supermarket chains around the world, has also seen growth stall recently after a promising start to signing up international clients. Last year it brought in £148 million, which is only about 50% more than the £100 million in sales the top performing Tesco hypermarkets turn over.

Ocado’s upfront expense in building and fitting out automated warehouses with the Global Platform tech also means the company’s financial situation will continue to deteriorate before it improves. 2023 is expected to deliver another big loss with capital expenditure, up 17% to £797 million last year, expected to remain high. After net debt last year doubled to £577 million a new cash call wouldn’t be a surprise despite £575 million being raised last year through a share issue.

Cashflow tightness has also led to the suspension of new capital investment in expanding Ocado’s network of UK distribution centres, which will have an impact on the growth and efficiency of its retail business.

Has Ocado been oversold?

Despite all of its difficulties, both now and over previous years, Ocado still has a lot going for it as a business. The online groceries channel is growing and is expected to continue to do so, even if growth may not be nicely even over time.

The proprietary technology Ocado has developed does put it in a strong position to profit from that growth over time, across both its UK-based retail deliveries partnership with M&S and its International Solutions business selling that technology into international supermarket chains.

The company’s heavy investment in R&D could still well pay off in the long run. Does that make the stock worth a punt at its current level, despite it being the worst performer on the FTSE 100 over the past 2 years?

It’s a tricky call because Ocado has consistently disappointed investors over the years by missing financial and growth targets and expectations. However, the same could be said of Tesla for many years.

Should companies developing revolutionary technology be held to a different standard when it comes to profitability timelines? Most investors and financial market analysts would say “yes”, but that doesn’t mean growth tech companies have unlimited runway. At some point, profits have to be banked, even if that means reigning in capital investment in R&D and other upfront investments it is hoped will prove ultimately profitable.

Cashflow and profitability are also important, especially during points in the market cycle like the one we currently find ourselves, and investors are clearly running out of patience with Ocado.

It’s hard to make a case for the company’s share price showing clear signs of being oversold on the basis of Ocado’s current business. Any returns at the company’s current valuation will still depend on the company’s future growth and profitability, across both its retail and technology businesses.

I personally believe Ocado stands a fair chance of coming good, but more pain could be on the horizon in the short term. The big question will be if the company has the liquidity to reach profitability without significant dilution of currently issued equity.

I won’t be selling the shares I currently hold in Ocado and would consider acquiring more but not right now. I’ll be keeping a close eye on developments this year, particularly news of new warehouse automation deals being closed in on or signed. That is likely to be the only realistic catalyst to a share price recovery in the next 12 months.

The post The Ocado share price is down over 60% in a year – is it time to buy? first appeared on Trading and Investment News.

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United Airlines adds new flights to faraway destinations

The airline said that it has been working hard to "find hidden gem destinations."

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Since countries started opening up after the pandemic in 2021 and 2022, airlines have been seeing demand soar not just for major global cities and popular routes but also for farther-away destinations.

Numerous reports, including a recent TripAdvisor survey of trending destinations, showed that there has been a rise in U.S. traveler interest in Asian countries such as Japan, South Korea and Vietnam as well as growing tourism traction in off-the-beaten-path European countries such as Slovenia, Estonia and Montenegro.

Related: 'No more flying for you': Travel agency sounds alarm over risk of 'carbon passports'

As a result, airlines have been looking at their networks to include more faraway destinations as well as smaller cities that are growing increasingly popular with tourists and may not be served by their competitors.

The Philippines has been popular among tourists in recent years.

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United brings back more routes, says it is committed to 'finding hidden gems'

This week, United Airlines  (UAL)  announced that it will be launching a new route from Newark Liberty International Airport (EWR) to Morocco's Marrakesh. While it is only the country's fourth-largest city, Marrakesh is a particularly popular place for tourists to seek out the sights and experiences that many associate with the country — colorful souks, gardens with ornate architecture and mosques from the Moorish period.

More Travel:

"We have consistently been ahead of the curve in finding hidden gem destinations for our customers to explore and remain committed to providing the most unique slate of travel options for their adventures abroad," United's SVP of Global Network Planning Patrick Quayle, said in a press statement.

The new route will launch on Oct. 24 and take place three times a week on a Boeing 767-300ER  (BA)  plane that is equipped with 46 Polaris business class and 22 Premium Plus seats. The plane choice was a way to reach a luxury customer customer looking to start their holiday in Marrakesh in the plane.

Along with the new Morocco route, United is also launching a flight between Houston (IAH) and Colombia's Medellín on Oct. 27 as well as a route between Tokyo and Cebu in the Philippines on July 31 — the latter is known as a "fifth freedom" flight in which the airline flies to the larger hub from the mainland U.S. and then goes on to smaller Asian city popular with tourists after some travelers get off (and others get on) in Tokyo.

United's network expansion includes new 'fifth freedom' flight

In the fall of 2023, United became the first U.S. airline to fly to the Philippines with a new Manila-San Francisco flight. It has expanded its service to Asia from different U.S. cities earlier last year. Cebu has been on its radar amid growing tourist interest in the region known for marine parks, rainforests and Spanish-style architecture.

With the summer coming up, United also announced that it plans to run its current flights to Hong Kong, Seoul, and Portugal's Porto more frequently at different points of the week and reach four weekly flights between Los Angeles and Shanghai by August 29.

"This is your normal, exciting network planning team back in action," Quayle told travel website The Points Guy of the airline's plans for the new routes.

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Walmart launches clever answer to Target’s new membership program

The retail superstore is adding a new feature to its Walmart+ plan — and customers will be happy.

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It's just been a few days since Target  (TGT)  launched its new Target Circle 360 paid membership plan. 

The plan offers free and fast shipping on many products to customers, initially for $49 a year and then $99 after the initial promotional signup period. It promises to be a success, since many Target customers are loyal to the brand and will go out of their way to shop at one instead of at its two larger peers, Walmart and Amazon.

Related: Walmart makes a major price cut that will delight customers

And stop us if this sounds familiar: Target will rely on its more than 2,000 stores to act as fulfillment hubs. 

This model is a proven winner; Walmart also uses its more than 4,600 stores as fulfillment and shipping locations to get orders to customers as soon as possible.

Sometimes, this means shipping goods from the nearest warehouse. But if a desired product is in-store and closer to a customer, it reduces miles on the road and delivery time. It's a kind of logistical magic that makes any efficiency lover's (or retail nerd's) heart go pitter patter. 

Walmart rolls out answer to Target's new membership tier

Walmart has certainly had more time than Target to develop and work out the kinks in Walmart+. It first launched the paid membership in 2020 during the height of the pandemic, when many shoppers sheltered at home but still required many staples they might ordinarily pick up at a Walmart, like cleaning supplies, personal-care products, pantry goods and, of course, toilet paper. 

It also undercut Amazon  (AMZN)  Prime, which costs customers $139 a year for free and fast shipping (plus several other benefits including access to its streaming service, Amazon Prime Video). 

Walmart+ costs $98 a year, which also gets you free and speedy delivery, plus access to a Paramount+ streaming subscription, fuel savings, and more. 

An employee at a Merida, Mexico, Walmart. (Photo by Jeffrey Greenberg/Universal Images Group via Getty Images)

Jeff Greenberg/Getty Images

If that's not enough to tempt you, however, Walmart+ just added a new benefit to its membership program, ostensibly to compete directly with something Target now has: ultrafast delivery. 

Target Circle 360 particularly attracts customers with free same-day delivery for select orders over $35 and as little as one-hour delivery on select items. Target executes this through its Shipt subsidiary.

We've seen this lightning-fast delivery speed only in snippets from Amazon, the king of delivery efficiency. Who better to take on Target, though, than Walmart, which is using a similar store-as-fulfillment-center model? 

"Walmart is stepping up to save our customers even more time with our latest delivery offering: Express On-Demand Early Morning Delivery," Walmart said in a statement, just a day after Target Circle 360 launched. "Starting at 6 a.m., earlier than ever before, customers can enjoy the convenience of On-Demand delivery."

Walmart  (WMT)  clearly sees consumers' desire for near-instant delivery, which obviously saves time and trips to the store. Rather than waiting a day for your order to show up, it might be on your doorstep when you wake up. 

Consumers also tend to spend more money when they shop online, and they remain stickier as paying annual members. So, to a growing number of retail giants, almost instant gratification like this seems like something worth striving for.

Related: Veteran fund manager picks favorite stocks for 2024

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President Biden Delivers The “Darkest, Most Un-American Speech Given By A President”

President Biden Delivers The "Darkest, Most Un-American Speech Given By A President"

Having successfully raged, ranted, lied, and yelled through…

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President Biden Delivers The "Darkest, Most Un-American Speech Given By A President"

Having successfully raged, ranted, lied, and yelled through the State of The Union, President Biden can go back to his crypt now.

Whatever 'they' gave Biden, every American man, woman, and the other should be allowed to take it - though it seems the cocktail brings out 'dark Brandon'?

Tl;dw: Biden's Speech tonight ...

  • Fund Ukraine.

  • Trump is threat to democracy and America itself.

  • Abortion is good.

  • American Economy is stronger than ever.

  • Inflation wasn't Biden's fault.

  • Illegals are Americans too.

  • Republicans are responsible for the border crisis.

  • Trump is bad.

  • Biden stands with trans-children.

  • J6 was the worst insurrection since the Civil War.

(h/t @TCDMS99)

Tucker Carlson's response sums it all up perfectly:

"that was possibly the darkest, most un-American speech given by an American president. It wasn't a speech, it was a rant..."

Carlson continued: "The true measure of a nation's greatness lies within its capacity to control borders, yet Bid refuses to do it."

"In a fair election, Joe Biden cannot win"

And concluded:

“There was not a meaningful word for the entire duration about the things that actually matter to people who live here.”

Victor Davis Hanson added some excellent color, but this was probably the best line on Biden:

"he doesn't care... he lives in an alternative reality."

*  *  *

Watch SOTU Live here...

*   *   *

Mises' Connor O'Keeffe, warns: "Be on the Lookout for These Lies in Biden's State of the Union Address." 

On Thursday evening, President Joe Biden is set to give his third State of the Union address. The political press has been buzzing with speculation over what the president will say. That speculation, however, is focused more on how Biden will perform, and which issues he will prioritize. Much of the speech is expected to be familiar.

The story Biden will tell about what he has done as president and where the country finds itself as a result will be the same dishonest story he's been telling since at least the summer.

He'll cite government statistics to say the economy is growing, unemployment is low, and inflation is down.

Something that has been frustrating Biden, his team, and his allies in the media is that the American people do not feel as economically well off as the official data says they are. Despite what the White House and establishment-friendly journalists say, the problem lies with the data, not the American people's ability to perceive their own well-being.

As I wrote back in January, the reason for the discrepancy is the lack of distinction made between private economic activity and government spending in the most frequently cited economic indicators. There is an important difference between the two:

  • Government, unlike any other entity in the economy, can simply take money and resources from others to spend on things and hire people. Whether or not the spending brings people value is irrelevant

  • It's the private sector that's responsible for producing goods and services that actually meet people's needs and wants. So, the private components of the economy have the most significant effect on people's economic well-being.

Recently, government spending and hiring has accounted for a larger than normal share of both economic activity and employment. This means the government is propping up these traditional measures, making the economy appear better than it actually is. Also, many of the jobs Biden and his allies take credit for creating will quickly go away once it becomes clear that consumers don't actually want whatever the government encouraged these companies to produce.

On top of all that, the administration is dealing with the consequences of their chosen inflation rhetoric.

Since its peak in the summer of 2022, the president's team has talked about inflation "coming back down," which can easily give the impression that it's prices that will eventually come back down.

But that's not what that phrase means. It would be more honest to say that price increases are slowing down.

Americans are finally waking up to the fact that the cost of living will not return to prepandemic levels, and they're not happy about it.

The president has made some clumsy attempts at damage control, such as a Super Bowl Sunday video attacking food companies for "shrinkflation"—selling smaller portions at the same price instead of simply raising prices.

In his speech Thursday, Biden is expected to play up his desire to crack down on the "corporate greed" he's blaming for high prices.

In the name of "bringing down costs for Americans," the administration wants to implement targeted price ceilings - something anyone who has taken even a single economics class could tell you does more harm than good. Biden would never place the blame for the dramatic price increases we've experienced during his term where it actually belongs—on all the government spending that he and President Donald Trump oversaw during the pandemic, funded by the creation of $6 trillion out of thin air - because that kind of spending is precisely what he hopes to kick back up in a second term.

If reelected, the president wants to "revive" parts of his so-called Build Back Better agenda, which he tried and failed to pass in his first year. That would bring a significant expansion of domestic spending. And Biden remains committed to the idea that Americans must be forced to continue funding the war in Ukraine. That's another topic Biden is expected to highlight in the State of the Union, likely accompanied by the lie that Ukraine spending is good for the American economy. It isn't.

It's not possible to predict all the ways President Biden will exaggerate, mislead, and outright lie in his speech on Thursday. But we can be sure of two things. The "state of the Union" is not as strong as Biden will say it is. And his policy ambitions risk making it much worse.

*  *  *

The American people will be tuning in on their smartphones, laptops, and televisions on Thursday evening to see if 'sloppy joe' 81-year-old President Joe Biden can coherently put together more than two sentences (even with a teleprompter) as he gives his third State of the Union in front of a divided Congress. 

President Biden will speak on various topics to convince voters why he shouldn't be sent to a retirement home.

According to CNN sources, here are some of the topics Biden will discuss tonight:

  • Economic issues: Biden and his team have been drafting a speech heavy on economic populism, aides said, with calls for higher taxes on corporations and the wealthy – an attempt to draw a sharp contrast with Republicans and their likely presidential nominee, Donald Trump.

  • Health care expenses: Biden will also push for lowering health care costs and discuss his efforts to go after drug manufacturers to lower the cost of prescription medications — all issues his advisers believe can help buoy what have been sagging economic approval ratings.

  • Israel's war with Hamas: Also looming large over Biden's primetime address is the ongoing Israel-Hamas war, which has consumed much of the president's time and attention over the past few months. The president's top national security advisers have been working around the clock to try to finalize a ceasefire-hostages release deal by Ramadan, the Muslim holy month that begins next week.

  • An argument for reelection: Aides view Thursday's speech as a critical opportunity for the president to tout his accomplishments in office and lay out his plans for another four years in the nation's top job. Even though viewership has declined over the years, the yearly speech reliably draws tens of millions of households.

Sources provided more color on Biden's SOTU address: 

The speech is expected to be heavy on economic populism. The president will talk about raising taxes on corporations and the wealthy. He'll highlight efforts to cut costs for the American people, including pushing Congress to help make prescription drugs more affordable.

Biden will talk about the need to preserve democracy and freedom, a cornerstone of his re-election bid. That includes protecting and bolstering reproductive rights, an issue Democrats believe will energize voters in November. Biden is also expected to promote his unity agenda, a key feature of each of his addresses to Congress while in office.

Biden is also expected to give remarks on border security while the invasion of illegals has become one of the most heated topics among American voters. A majority of voters are frustrated with radical progressives in the White House facilitating the illegal migrant invasion. 

It is probable that the president will attribute the failure of the Senate border bill to the Republicans, a claim many voters view as unfounded. This is because the White House has the option to issue an executive order to restore border security, yet opts not to do so

Maybe this is why? 

While Biden addresses the nation, the Biden administration will be armed with a social media team to pump propaganda to at least 100 million Americans. 

"The White House hosted about 70 creators, digital publishers, and influencers across three separate events" on Wednesday and Thursday, a White House official told CNN. 

Not a very capable social media team... 

The administration's move to ramp up social media operations comes as users on X are mostly free from government censorship with Elon Musk at the helm. This infuriates Democrats, who can no longer censor their political enemies on X. 

Meanwhile, Democratic lawmakers tell Axios that the president's SOTU performance will be critical as he tries to dispel voter concerns about his elderly age. The address reached as many as 27 million people in 2023. 

"We are all nervous," said one House Democrat, citing concerns about the president's "ability to speak without blowing things."

The SOTU address comes as Biden's polling data is in the dumps

BetOnline has created several money-making opportunities for gamblers tonight, such as betting on what word Biden mentions the most. 

As well as...

We will update you when Tucker Carlson's live feed of SOTU is published. 

Tyler Durden Fri, 03/08/2024 - 07:44

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