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Ocado Tops FTSE 100 After JP Morgan Flags 'Tipping Point' In Profitability

By Steve Wynne-Jones
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Ocado Tops FTSE 100 After JP Morgan Flags 'Tipping Point' In Profitability

Online supermarket Ocado Group Plc's shares rose 2.9% at 1183.5 pence in morning trading today, making the retailer the biggest percentage gainer on the FTSE 100.

JP Morgan raised its price target slightly to 1073p from 1070p, citing model update; reiterating a neutral rating "purely on valuation grounds".

It flagged that Ocado is at a tipping point in terms of profitability, saying small absolute changes can lead to larger percentage changes.

Economic Model

JP Morgan views Ocado as operating a superior economic model than many store-based operators.

It said that Ocado operates with lowest picking costs in the industry and does not face the duplication of costs and capex that incumbents face.

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It believes as Ocado benefits from the online shift, it should be able to improve buying and dilute costs and thus operate with higher margins,

Ocado shares up approximately 50% in value this year, compared with Morrison's, which has seen an approximate 15% decline, and Sainsbury's, which has seen a 30% fall.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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