RBC Capital downgrades Ocado, Boohoo
Ocado Group
347.20p
16:35 19/04/24
RBC Capital Markets downgraded its stance on online supermarket Ocado and fast-fashion retailer Boohoo on Thursday.
Boohoo Group
33.62p
16:40 19/04/24
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17:10 19/04/24
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It cut Ocado to ‘underperform’ from ‘sector perform’ and slashed the price target to 560p from 800p.
"We continue to view Ocado's technology solutions as industry-leading; however on analysis of the group's cash flow potential, its mid-term targets appear ambitious," it said.
"Moreover, risk of additional financing, a likely slow recovery at Ocado Retail, downside risk to group estimates, a lower probability of further game-changing international deals and a relatively rich valuation lead us to downgrade the shares to underperform."
In a separate note, RBC also downgraded Boohoo to ‘underperform’ from ‘sector perform’, keeping the price target at 35p.
"We expect BOO's less competitive service internationally to weigh on its top-line recovery mid-term while benefits from a new US warehouse might deliver later and less than expected," it said.
"Meanwhile, limited scope for price increases, ongoing elevated marketing spend and inefficiencies from a new distribution centre (DC) are likely to weigh on a margin recovery."
RBC said these factors mean its EBITDA forecasts are 21% to 28% below consensus.
"Following the stock's recent more than 100% re-rating, we view valuation as demanding, considering risks of further earnings disappointment."