Ocado’s share price (LON: OCDO) has soared 155% since March and the retailer has overtaken Tesco as the UK’s most valuable retailer.
Thanks to its rising share price, the group is now raised at £21.7bn, £0.7bn higher than Tesco.
In the three months to the end of August, sales at Ocado soared 52%.
Neil Wilson, the chief market analyst at Markets.com, commented on the market valuation: “Ocado holds enormous promise but whether it can deliver is quite another matter, the cash burn remains and the payback from all these overseas deals is taking a very long time.”
The retailer “has rocketed this year thanks to the boom in online retail”, but a problem is “setting up fulfilment centres costs a lot and the returns are slow.”
Whilst Tesco controls 26.8% of the UK’s grocery market whilst Ocado has just 1.7%.
Ocado’s share price has particularly taken off since 2017 when the group has landed various deals with Kroger, Sobey’s, ICA Group, and Casino.
Tesco’s online sales have surged over lockdown, however, the share price has remained unfazed due to “worries about price wars”.
“We think that working from home, the collapse of [eating out] represents a step change, not just this year but ongoing,” he added about Ocado’s share price.
Shares in the group jumped after the group switched to groceries from Marks & Spencer. Sales also surged 50% in the third quarter.
Ocado shares (LON: OCDO) are trading -5.17% at 2.602,00, whereas Tesco shares (LON: TSCO) are -1.18% 210,00 (1431GMT).