JP Morgan has doubled down on its upbeat view of Ocado Group PLC (LSE:OCDO), keeping an “overweight” rating and lifting its price target to 437p.
The bank's argument is simple: the company is now at a turning point operationally, with the data increasingly supporting the bulls.
First, JPM sees Ocado’s Technology Solutions business as key.
This is the arm that licenses its warehouse and automation technology to supermarkets around the world.
There is now a pipeline of eight new customer fulfilment centre launches due between 2025 and 2027, and these projects are largely seen as low-risk.
That gives much more visibility on future revenue, which is always welcome in a company that has faced plenty of doubts.
Cost management is also improving, with both technology and support expenses being trimmed.
JPM forecasts a group EBITDA compound annual growth rate of 43% between now and 2027, and expects Ocado to break even on free cash flow by the second half of 2026, matching management’s own guidance.
The retail joint venture with Marks & Spencer is another bright spot. It has become the UK’s fastest-growing grocer, reporting a 16.3% jump in sales for the first half, fuelled by a 13% rise in customer numbers.
One technical but important shift: it is now cheaper and less risky for new supermarket partners to sign up with Ocado.
The company can now launch with just two or three modules, rather than six or more previously. This lowers the hurdle for potential new deals.
JPM also thinks worries about the balance sheet are fading, with no refinancing needed for at least three years.
The team has updated its model for the deconsolidation of Ocado Retail and now sees more opportunity for future deals as exclusivity periods roll off and operational efficiency improves.
All this adds up to a story where the negatives that have dogged Ocado in recent years are giving way to a more compelling, growth-focused outlook.
In afternoon trading, the stock was flat at 314p.