The FTSE 100’s Only Riser of 2020 Is An Online Grocery Provider

(Bloomberg) --

With coronavirus worry sending equity markets plunging, only one stock in the U.K. FTSE 100 Index is showing a gain on the year.

Ocado Group Plc has risen 7.6% since the end of 2019 on recognition that the online grocery firm is set to benefit from increasing demand for deliveries to the home during the pandemic. More than that, the potential for long-term change in shopping habits brought about by the virus outbreak is attracting investors to the company’s position as a leading global provider of technology for Internet-based grocery shopping.

“Globally, online grocery has surged, but increased demand has highlighted the inadequacy of manual picking operations,” Berenberg analysts including Thomas Davies wrote in a note. “We believe grocers will recognize the need for automated fulfilment. Ocado is primed to capitalize.”

Ocado has been shifting focus in recent years to providing supermarket chains worldwide with technology solutions. The aim is to make its warehouse robotics and grocery home-delivery technology available to other supermarkets for a licensing fee.

Berenberg isn’t the only one that’s optimistic about Ocado’s prospects. Bernstein analyst Bruno Monteyne sees the potential for the U.K. company’s shares to be valued at between 40 pounds and 100 pounds by 2030 on the assumption that more warehouses will be built globally, kitted out by Ocado. The stock was trading at 13.62 pounds as of 10 a.m. in London.

Ocado’s recent equity outperformance is nothing new. The shares have risen more than fivefold since the company announced a technology licensing deal with France’s Casino Guichard-Perrachon SA in 2017. Since then, it has signed similar agreements with Canada’s Sobeys Inc., Sweden’s ICA Gruppen AB, Kroger Co. in the U.S. and Coles Group Ltd. in Australia.

A trading update scheduled for Thursday could provide a further positive catalyst, according to Berenberg. A trip to the company’s Erith warehouse about two weeks ago shows average basket sizes have increased by 25%, the broker said.

©2020 Bloomberg L.P.