Ocado Group PLC (LSE:OCDO) has “turned a corner”, with the risk/reward “skewed to the upside” while the non-grocery market offers a £55 billion opportunity.
That is the view of analysts at Bank of America which reinstated coverage of the online food retailer today with a 'buy' rating and 850p price target, offering 57% upside from current levels.
The investment bank thinks both Ocado Retail and Ocado Technology Solutions are at a positive inflection point as online penetration rises and inflation fades.
E-commerce penetration is now rising after two years of continuous decline, which should incentivise grocers to invest again in their online fulfilment capabilities, BofA thinks, with Ocado Technology Solutions best positioned to meet that demand.
It sees potential for a further 30 customer fulfilment centres on top of the current pipeline for 60 which BofA believes backs the group's key financial targets for 2026-28.
“Next up, Ocado is entering the non-grocery market, where its tech is easily transferrable: we think this is a £55 billion opportunity in the UK alone - 2.5x bigger than grocery,” the bank said.
“Overall, we believe Ocado's existing operations support the group market valuation, and we would expect any new deal - in grocery or beyond - to act as a positive catalyst for the shares,” the bank said in a research note.
Shares are up 0.6% at 545.20p, off an earlier high of 577p.