Ocado Group PLC (LSE:OCDO) shares fell 11% after a long-time supportive analyst seemed to give up on the stock.
Bernstein analyst William Woods, who has been bullish on the online grocery company for at least two years, slashed his share price target to 250p from 1,000p, leading to his recommendation being double-downgraded to ‘underperform’ from ‘outperform’.
Having been "one of the last bulls standing", the analyst admitted that the company long criticised by others as a 'jam tomorrow story' is now "less jam, more tomorrow".
Overseas customers Kroeger in the US, Sobeys in Canada and Coles in Australia have paused or pushed back plans for robot-run warehouses, bringing the spectre of likely fundraising into play as the company will need more cash.
Ocado faces "increased and significant" liquidity challenges, the analyst said, with a need for between £0.5 billion and £1 billion, on top of refinancing almost £1.5 billion more of debt over the next two to three years.
"The business needs to take a serious look at its options," including considering whether it is "right to be a public equity".
"We have long been believers in the strength of Ocado’s technology, the CFC economics and the growth of online grocery, supporting their pipeline," Woods said.
"However, online has not bounced back post-pandemic and CFCs have no ramped as expected. Partnerships have been paused (Kroger, Sobey’s) or delayed (Coles)."
Given that demand has been slower than hoped, the Bernstein analyst cut his forecasts, resulting in the reduced price target and the double-downgrade.