Ocado stock has been on a tear ever since the company announced on August 9 that it was extending its deal to deliver groceries for Morrisons. The stock was up by another 1% this morning before settling back at about 305p.
That is surprising because Ocado is the most-shorted stock in the UK. Almost a fifth of its shares are held by investors betting the price will fall, according to Castellain Capital’s Short Tracker site. Blackrock, Discovery Capital, GMT Capital, and Jericho Capital are among the firms holding large negative positions in OCDO.
They likely see Amazon’s entry into the UK online shopping delivery market as a key driver of Ocado’s demise. Indeed, when Amazon announced it was launching Amazon Fresh in London, OCDO took a dive.
After the June 13 Amazon announcement Ocado collapsed to 234p:
The deal with Morrisons adds capacity for an extra 200,000 orders per week at Ocado’s new “Customer Fulfillment Centre” in Erith (CFCs are the giant warehouses Ocado uses to control operations.) Currently, Ocado delivers 300,000 orders per week. The centre will be the company’s fourth, after Andover, Hatfield, and Dordon.
Since the August 8 Morrisons announcement, the stock has shot up to 305p, a rise of about 22% in just a few days:
Investors (like me) seem to be slowly realising that Ocado has a long, long way to go before its growth story is over. Its four CFCs are all located in the South of the UK. Ocado has barely touched the North yet, and it is already booking half a billion pounds in revenue every six months.
The company produced this chart on its last earnings call, showing how it believes the British supermarket business is being split into two groups: winners and losers.
Disclosure: The author owns Ocado stock.
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