Ocado has now overtaken Tesco to become the UK’s most valuable retailer despite representing just a 15th of its market share.
Ocado’s latest stock price surge means the company is now worth £21.7 billion, surpassing the UK’s largest supermarket Tesco’s £21.1 billion comfortably, marking a staggering 155 per cent rise since March.
Its blistering year of growth comes despite it failing to significantly expand its share of the UK’s grocery market, currently representing a meager 1.7 per cent, according to Kantar.
The pandemic has played into Ocado’s hands however, with the seismic shift towards online grocery during lockdown seeing online grocery’s share of the market jump 4.5 per cent since March.
Ocado’s retail arm, which is now joint owned by Marks & Spencer, is still performing well having reported a 52 per cent rise in sales over its last quarter, but investors believe its true value lies in its technology arm.
Over the past two years Ocado has largely shifted its focus to its Solutions business, which provides third party retailers with its cutting-edge automated technology.
After penning its first deal to provide its robotic solutions to France’s Groupe Casino in 2017, Ocado has signed a further eight deals across the world to date with various major retailers like Kroger in the US.
Subsequently Ocado is no longer viewed as a retailer, but more as a technology company by investors.
Some investors have questioned its new valuation, highlighting its poor profit track record and slow return on investment for its overseas deals.
“Ocado holds enormous promise but whether it can deliver is quite another matter, the cash burn remains and the payback from all these overseas deals is taking a very long time,” Markets.com’s chief market analyst Neil Wilson said.
He added that “setting up fulfilment centres costs a lot and the returns are slow”.