MARKET REPORT: Cocktail of economic woes take toll on Ocado

Ocado shares fell as analysts sounded the alarm over a cocktail of economic woes.

In a setback for the FTSE 100 online supermarket, investment banks JP Morgan and HSBC cut their target prices on the stock to 400p and 370p respectively.

Shares, which have fallen by nearly a third this year, sank 2.5 per cent, or 10.9p, to 424p.

JP Morgan told clients that ‘Ocado’s online grocery activities will continue to face meaningful headwinds in the next months’.

The mood was not helped by HSBC, which said ‘the clock is ticking’ for the blue-chip firm amid signs that the pathway towards growth is getting squeezed. 

Squeezed: JP Morgan and HSBC have cut their target prices for Ocado stock to 400p and 370p respectively

It pointed towards Ocado’s announcement towards the end of April that its oldest warehouse will close. The Hatfield site in Hertfordshire receives around 20 per cent of the company’s retail orders, HSBC said.

The gloomier forecasts from JP Morgan and HSBC provided a sharp contrast to BNP Paribas Exane, which last week told its clients that Ocado’s ‘outlook and market sentiment are much better aligned’.

The FTSE 100 slid 0.3 per cent, or 19.17 points, to 7569.31, and the FTSE 250 was down 0.6 per cent, or 108.13 points, to 18746.16.

Officials on Threadneedle Street have been warned that Britain will be plunged into a recession if interest rates are raised to 6 per cent.

Richard Hunter, head of markets at Interactive Investor, said: ‘The Bank finds itself between a rock and a hard place, with marginal growth being offset by persistent inflation and widespread wage increases, which themselves are inflationary.’

Traders made a dash towards car dealers on the back of Lookers encouraging its shareholder to accept a 120p-a-share offer from Canada’s Alpha Auto Group. Lookers jumped 33.9 per cent, or 30.1p, to 118.8p, Pendragon gained 5.3 per cent, or 0.84p, to 16.74p and Vertu Motors added 8.9 per cent, or 5.6p, to 68.4p.

Stock Watch – Somero Enterprises

Shares in Somero Enterprises fell 7.6p per cent, or 25p, to 305p as it cut its workforce by 10 per cent in the face of lower-than-expected revenues.

The construction equipment specialist said soaring interest rates and tighter bank lending criteria had delayed plans.

As a result, revenue in the first five months of 2023 should be between 15p per cent and 20 per cent below the record £54million reported the year before.

It is likely to make £94million of revenue this year – around 10 per cent below 2022’s £105million.

WPP’s acquisition spree showed little signs of slowing after it snapped up a 30 per cent stake in a US-based creative agency.

Boss Mark Read said the advertising giant has been impressed by the ‘vision, market positioning and trajectory’ of Majority, which was founded two years ago by Omid Farhang and the retired American basketball star Shaquille O’Neal.

WPP shares slid 0.6 per cent, or 4.8p, to 858.4p. There was good news for Rolls-Royce investors after the jet engine maker’s boss said the company was making progress in its turnaround plan.

Tufan Erginbilgic, who took over at the helm from Warren East at the start of this year, told the Paris Air Show the group could return to the narrow body market if the right opportunity came along. 

The Rolls-Royce chief executive had previously described the company as a ‘burning platform’ that needed to streamline. Shares rose 2.1 per cent, or 3.2p, to 157p.

S Three shifted its focus from permanent hires to contract workers. The group, which specialises in roles in science, technology, engineering and mathematics, saw fees from its permanent business plunge 19 per cent to £38.6million in the six months to the end of May.

That coincided with a 3 per cent rise in income from its contract division, which makes up more than 80 per cent of group fees.

Shares slipped 1 per cent, or 3.5p, to 363.5p yesterday.

Tekcapital – which invests in university-developed discoveries – was flat at 13p despite one of its investments landing a deal to make Bluetooth audio glasses for Reebok.

Innovative Eyewear will work with New York-based Authentic Brands Group to make an eyewear collection for the US sports giant that should make its debut early next year.

This post first appeared on Dailymail.co.uk