Where to Next for the Ocado Share Price?

Summary:
• Ocado share price has been moving sideways in the past few days as the remarkable recovery stalls. OCDO shares are trading at 952p

Ocado share price has been moving sideways in the past few days as the remarkable recovery stalls. OCDO shares are trading at 952p, where they have been in the past few days. The price is about 34% above the lowest level this year. However, the stock remains about 70% below its all-time high, bringing its total valuation to about 7.1 billion pounds.

Is Ocado still overvalued?

Ocado’s valuation has dropped from over £15 billion to the current £7.1 billion. This decline has happened as the shares have fallen by over 70% from their all-time high. Still, some analysts believe that Ocado is still overvalued based on its lack of profitability and slow growth.

For starters, Ocado is a technology company that operates in the e-commerce space. For example, it has a joint venture with Marks and Spencer for its UK retail business. At the same time, Ocado provides warehousing services to retailers like Kroger. 

Ocado faces numerous challenges. The cost of doing business has risen in the UK and its key markets. Further, there are signs that retail spending has declined in the past few months as inflation bites. Most importantly, people are no longer buying online as they used to do. 

The Ocado share price is overvalued. For one, the company is still deeply in the red. While its revenue grew to $3.3 billion in the year to November, its loss ballooned to over $248 million. Moreover, a closer look at its income statement shows that the company was only profitable in 2014, 2015, and 2016. Since then, its losses have continued mounting. 

Ocado share price forecast

The four-hour chart shows that the OCDO share price made a strong bottom at 700p. Since then, the stock has managed to recover by about 20%. Along the way, it rose above the important resistance level at 830p, which was the highest level on May 22. The shares are still above the 25-day and 50-day moving averages and between the descending channel shown in black. It has also moved above the Ichimoku cloud.

Therefore, in the near term, the stock will likely retest the key resistance at 1,000p and then resume the bearish trend. On the flip side, a drop below the support at 900p will invalidate the bullish view.