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I always knew the Ocado (LSE: OCDO) share price would pull a fast one. After inflicting misery on my portfolio for years, I suspected the moment I dumped the FTSE 250 online grocery and warehouse technology specialist, the clouds would lift and it would suddenly head for the stars.
And that’s exactly what’s happened. I don’t know who to rage against. Myself, for selling. The gods, who hate me. Or Ocado, for rubbing fine-grade home-delivered sea salt in my wounds. So what’s going on?
FTSE 250 growth hopeful
Ocado was once the great hope of British tech investing. Its automated warehouses and robot armies promised to revolutionise grocery shopping worldwide. During the pandemic, when online grocery orders soared, investors bought into the dream.
But the world changed. Shoppers returned to supermarkets, while rivals found cheaper ways to fulfil online orders. Ocado’s enormous customer fulfilment centres (CFCs) cost a fortune to build, and it struggled to persuade enough grocers to use them.
American partner Kroger slowed its warehouse rollout, Canadian partner Sobeys paused expansion, and Morrisons shifted more online orders towards store-based fulfilment. The shares plunged around 95% from their peak.
I bought in 2024, convinced the worst must surely be over, only to find myself nursing on a 40% loss. Every so often, a better-than-expected update or hopes of positive free cash flow sparked a rally. Then the shares resumed their downward spiral.
For me, the final straw came with half-year results on 16 July. Ocado reported a £25m net cash inflow, but underlying cash flow remained £147m in the red. It didn’t exactly scream recovery.
I sold on 23 July at 182p, crystallising a 51% loss. Only Aston Martin has left more skid marks on my portfolio. I was down 75% when I hit the ejector seat on that one. Don’t tell me it’s climbing today.
At today’s price of 303p, Ocado shares have climbed roughly 66% from my selling price. I’d still be in the red overall, but my losses would be greatly reduced.
Suddenly, everyone’s a buyer
The catalyst was a report that Australian supermarket giant Coles was in early talks about trialling Ocado robots to pick and pack online grocery orders inside a Melbourne supermarket. No deal has been signed, but this could offer grocers a cheaper alternative to building huge automated warehouses.
Ocado has also secured a partnership with Asda to develop its online business, with a pilot expected before a wider rollout in 2027. Meanwhile, management is cutting £150m from technology and support costs.
Ocado’s technology is clever, and supermarkets face pressure to improve efficiency as labour costs rise. The tricky bit is turning that into profitable contracts. But Ocado could still do it.
Results are still patchy
I’m not going anywhere near this one again. It still need to turn customer interest into contracts. Technology stocks face a tough test as borrowing costs surge, and investors demand evidence of real profits. That makes the Ocado rebound all the more impressive, but also fragile.
There may be a turnaround opportunity here for investors who do their homework to consider. But I can see steadier growth prospects elsewhere on the FTSE today, including this…
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Harvey Jones does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
