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.
“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.