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Ocado target price hiked as Peel Hunt estimates firm could take 25% share of online grocery market

The broker highlighted that the coronavirus pandemic had caused a sharp rise in online as a percentage of the overall grocery market, notably in the UK, US and China

Ocado Group PLC - Ocado target price hiked as Peel Hunt estimates firm could take 25% share of online grocery market

Ocado Group PLC (LON:OCDO) has had its target price hiked to 2,490p from 1,700p by analysts at Peel Hunt, who predicted that the grocery delivery group will take a 25% share of the online market.

In a note on Thursday, the broker retained its ‘buy’ rating on the stock, saying while grocery had been “very slow to shift online”, the coronavirus pandemic had caused online penetration is grocery to jump to 13% in the UK from 7%, while in the US the figure had increased six-fold while China saw triple-digit year-on-year sales growth. Peel Hunt also highlighted estimates from Ocado chief executive Tim Steiner that at least 75% of grocery shopping could move online.

READ: Morrisons and Ocado enjoy gains but grocers coronavirus boost eases slightly

“Ocado’s deals to date add up to £210bn in gross sales, which is 7.5% of its £2.8tn key markets. Ocado believes it could hit 25% market share, as the market leader, and over time 75-80% could go online. As it takes a 5% fee as its revenue, this turns into an annual revenue stream of £26bn+!”, Peel Hunt said.

“With more insight into the potential profitability of its Solutions business at maturity, we look at 15 years

out...Our base case assumes 25% market share of a market that is 50% online at that point”, the broker added.

Shares in Ocado ticked up 0.2% to 2,200p in late-morning trading.

Quick facts: Ocado Group PLC

Price: 2772 GBX

Market: LSE
Market Cap: £20.71 billion

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