Ocado Group PLC (LSE:OCDO) shares have been double-upgraded by Credit Suisse as its new robot technology is expected to lead to more fruitful partnership deals with bricks-and-mortar supermarkets.
Earlier this month, under the banner of 'Ocadao Re:Imagined', the FTSE 100 online grocer presented its vision for the future to investors and analysts, including its new faster, cheaper and lighter 600 Series bot, a new robotic arm and improvements to its automated despatching system.
Following this, Credit Suisse said it now has "greater confidence in the depth of existing partnerships" and sees a potentially higher total addressable market (TAM) "for new and more flexible solutions".
Furthermore, Credit Suisse told clients that a 50% share price fall in the past 12 months reflects some concerns about the business and suggests that further downside is "limited".
Adding the new Re:Imagined features into its forecast model resulted in a 17% increase in the target price to 1,750p from 1,500p, the bank hiked its rating to 'outperform' from 'underperform', and for clarity explained "we believe current levels offer a buying opportunity".
"Re:Imagined is designed to address more shopping missions and allow deeper relationships with existing partners," the bank's analysts said.
They now expect Ocado's partnership with US supermarket chain Kroger to target US$14bn in sales fulfilled within the Ocado partnership, which would be around 10% of 2022 revenues, and "see fewer risks to capacity ramp-up with other partners".
On the broader, TAM, the new tech platform is now seen as resulting in a higher likelihood of several, "likely small", partnerships being signed in coming years, on the basis that the new platform can be combined with in-house web solutions, does not require large warehouses and requires less than U$50mln initial capital expenditure.
Next week's full-year results are expected to be "uneventful" apart from revised guidance hitting future forecasts, while risks include a persistent legal battle with rival Autostore.