Ocado shares have been on a tear this week, with the food technology company topping the FTSE 100’s top gainers for the past few trading sessions.
The Ocado share price was again the top riser at the time of writing on Friday, with gains of over 4%.
We look at the factors driving recent price action in Ocado shares as the stock rebounds from the 460p mark.
Interest Rates
Although Ocado is predominately associated with its premium grocery delivery service, the company is viewed by many market participants as a technology company. Ocado has developed proprietary technology concerned with the distribution of groceries, which is used by their delivery service and third-party supermarkets.
Ocado’s Customer Fulfilment Centres (CFC) improve the way grocery companies prepare and organise deliveries ready for distribution using artificial intelligence and robots.
This side of the business has earned Ocado the label of a ‘tech stock’ in some quarters, meaning the company trades in a similar fashion to US tech giants like Meta, Apple and Amazon.
The hiking cycle increased the risk-free rate and made technology-focused equities less attractive over the past 18 months. Those with lofty valuations, including Ocado, were punished.
After the Federal Reserve and the Bank of England both kept interest rates on hold this week, technology shares have received a bid as investors position for the end of the hiking cycle and a period more favourable for tech stocks. This can explain the rally in Ocado shares this week.
Ocado is oversold
Ocado shares entered oversold territory in late October and built a base around 460p. Having found support after shares halved from July highs in the region of 950p, the stock just needed a catalyst to spark a bounce.
Such a catalyst was found in interest rate decisions this week and a general uptick in the technology sector.
Strong Sainsbury’s Earnings
Sainsbury’s earning update released this week will have encouraged Ocado investors. Sainsbury’s, seen as one of the premium supermarkets, has managed to increase sales by offering lower-priced groceries and running offers to attract shoppers.
Ocado shareholders will be hoping Ocado’s efforts to attract customers and increase basket sizes by competing on pricing through special offers will have a similar impact.
The latest data from Kantar showed the joint venture between Marks & Spencer and Ocado enjoyed a 9.6% uplift in sales in the four weeks to 1st October as market share increased to 1.7% from 1.6%.