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Ocado adds nearly 8% after UBS buy recommendation

Some good news for Ocado, the online shopping group, which has been under pressure recently on worries about its growth prospects and increased competition, not least from its current partner Waitrose.

Ahead of a trading update due on September 19, analysts at UBS have raised their rating on the business from neutral to buy, although they have trimmed their price target from 195p to 170p. Still, that was enough to lift Ocado’s shares by 8.6p to 117.1p. UBS analyst Mike Tattersall said:

Ocado’s sales performance has been broadly in line with our expectations from the time of the IPO last year and while EBITDA has fallen short, supplier income has significantly exceeded our expectations and should remain a lucrative, growing revenue stream for many years.

Some recent commentary has focused on Ocado’s balance sheet and the mooted risk of further equity issuance. Our analysis suggests that Ocado has considerable headroom under its current facilities and substantial flexibility to raise further funds without recourse to equity markets. A re-financing of the main debt facility, providing more headroom and/or improved terms would allay balance sheet fears. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds