Ocado to be "main beneficiary" of UK online grocery growth, says Killik

2nd Jun 2014 11:06

Ocado's stock, having recently dipped below the 400p level, is down significantly from the peak reached earlier in the year and now offers a "very attractive entry point", according to Killik.The broker kept a 'buy' rating for shares of the online grocer, which have dropped nearly 40% since hitting an all-time closing high of 617p on February 26th."Ocado offers a unique way to play the expected strong growth in UK online grocery sales, while also offering investors the potential to benefit from its industry-leading intellectual property built up over 13 years of investment in technology to more efficiently manage the online shopping and delivery experience," Killik said on Monday.The broker believes that online grocery penetration in the UK, currently low at just 3.8%, could grow to a double-digit rate by 2020 with Ocado being the "main beneficiary", especially after recent investments to increase capacity.Meanwhile, it sees the potential for the company to license its technology - like it did to UK supermarket WM Morrison to help launch its internet shopping channel - to other retailers globally.The broker also said that margins should expand at the company, "both through operating leverage due to the high fixed cost base, and improved efficiency driven by technology". Consensus forecasts for earnings are "too low", it said.The stock was down 0.7% at 384.18p by 11:25.BC