Morgan Stanley has downgraded its rating for online grocer Ocado Group PLC (LON:OCDO) following strong gains by the stock in the wake of this month’s new international partnership deal with US firm The Kroger Co.
The US investment bank cut back its stance for the FTSE 250-listed firm to ‘equal-weight’ from ‘overweight’ while upping its target price to 870p from 545p.
READ: Ocado and Kroger looking to transform US grocer sector
In a note to clients, Morgan Stanley’s analysts pointed out that Ocado shares have “rightly added” 625p in the past half year.
They said: “We see upside beyond the initial contract for Kroger but also execution risk. Beyond the US, our analysis shows the international opportunity is limited.”
The analysts concluded: “With a lack of material catalysts we move to Equal-weight.”
In mid-morning trading, Ocado shares were 2.1% lower at 868p although the fall did little to dent expectations that the mid cap firm will be elevated to the FTSE 100 index following the last quarterly reshuffle to be announced on Wednesday, which is based on Tuesday’s closing prices.