The Ocado (LON: OCDO) share price slumped sharply on Thursday after the company published weak earnings. The stock dropped to a low of 1,100p, which is close to its year-to-date low. The price is close to where it was in March 2020 and is about 62% below its all-time high.
Ocado decline continues
Ocado is a giant London technology company valued at more than £8.3 billion. The company offers e-commerce solutions through its joint venture with Marks and Spencer. It also offers warehouse solutions to other companies globally, with its biggest customer being Kroger.
Ocado was one of the biggest beneficiaries of the Covid-19 pandemic as the number of online orders rose. As a result, its business saw robust growth in 2020.
However, the Ocado share price has struggled in the past few months as worries about the company’s growth and profitability remained. For example, its total revenue in 2021 rose by 7.2% to £2.4 billion while its loss jumped to over £176 million.
On Thursday, Ocado confirmed that its business was going through a significant slowdown. In a report, the company said that its revenue will likely grow at a slower pace than what it had predicted before.
Its first-quarter sales declined by 5.7% as customers returned to their pre-pandemic habits of shopping in supermarkets and requiring fewer groceries. It also warned that its full-year revenue will be closer to 10%. Further, while the company raised the number of active customers to 835k, the total basket size declined by about 15%.
Analysts believe that the Ocado share price has more to fall as the management embarks on delivering a turnaround for the business. The biggest risk is that the firm has high operating costs and low profitability. Indeed, in the past decade, the company has spent billions in investments and delivered minimal profits.
Ocado share price forecast
The daily chart shows that the OCDO share price has been in a deep downward trend in the past few months. As a result, the stock is trading near its two-year low.
At the same time, it has crashed below the 50-day and 100-day exponential moving averages (EMA) while the Money Flow Index (MFI) is at a neutral level.
Therefore, the Ocado share price will likely keep falling in the near term as growth concerns remain. If this happens, it will likely move below 1000p.
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