Broker snap: Morrison deal could be 'game changer' for Ocado, says Prime Markets

14th Mar 2013 10:49

Shares in online grocer Ocado rocketed on Thursday morning after the company confirmed alongside its first-quarter update that it would help supermarket chain Morrison to launch an internet shopping website, something that could be a 'game changer', according to Prime Markets.The group said that it is in talks with Morrison which could lead to an agreement to license its existing and future intellectual property and operating know-how with Morrison. A potential deal would be complementary to its existing partnership with Waitrose, the company said.Ocado also reported a 14.4% rise in gross sales in the 12 weeks to February 24th and a 12% increase in average orders per week."At the time Ocado floated, many in the markets viewed the stock as a bit of a turkey, as it relied on a single contract with Waitrose to generate revenues," said Prime Markets' Head of Dealing, Richard Curr."Subsequently, the stock drifted gradually lower, but since November last year, the group has evolved into something of a swan, as takings at Waitrose have improved, the group has further developed a range of own brand groceries and distribution deals have been done with Carrefour."Curr said that the uptrend in revenues, orders and volumes as well as a potential tie-up with Morrison means that the company is "coming of age"."Even with the sharp share price improvement from last year, the valuation is still relatively modest, and in particular Prime Markets believe the tie up with Morrison could be a game changer. We expect Ocado shares to return to mid-2011 highs at 190p, and probably beyond 200p in the not too distant future."The stock was up 17.47% at 161.4p by 11:03.BC