Ocado Group PLC (LON:OCDO) shares rose on Monday as Goldman Sachs upgraded its rating after calling UK online grocer’s partnership with US retail giant Kroger Co (NYSE:KR) “transformational”.
Goldman Sachs upgraded Ocado’s rating to ‘buy’ from ‘neutral’ and set its price target at 1,160p.
READ: Ocado and Kroger looking to transform US grocer sector
In a note to clients, analysts at Goldman Sachs said Ocado’s partnership with Kruger was ‘transformational’ both in the number of distribution centres Kroger is looking to start building and in the validation of Ocado’s Smart Platform (OSP) as an online grocery solution with a global addressable market.
The analysts said: “Though the stock price moved materially to reflect this, our analysis at a local market level points to a US opportunity more than double Kroger’s initial commitment, with the economics to Kroger clear on our calculations.”
“Finally, our updated work on Ocado’s core business points to a UK retail business worth 700p, with further potential upside from further automation of Ocado’s CFCs,“ the analysts concluded.
In morning trading, Ocado’s shares rose 3.4% to 1,033.5p.