Is the Ocado share price too cheap or is it a value trap?

Ocado (LON: OCDO) share price sell-off continued on Wednesday as investors reacted to the relatively weak Tesco earnings. The stock dropped to a low of 112p, which is close to its lowest level this year. The shares have dropped by more than 60% from its highest level in 2021.

Retail growth in focus

The global retail industry is going through significant challenges as costs rise and logistics challenges remain. 

Are you looking for fast-news, hot-tips and market analysis?

Sign-up for the Invezz newsletter, today.

Ocado is a company at the intersection of technology and the retail sector. In the UK, it operates through its joint venture with Marks and Spencer, the giant retailer. Globally, the company provides its high-tech warehouses for leading companies. 

The Ocado share price has been in a strong bearish trend in the past few months as investors worry about its lack of profitability and the rising complexities of the industry. While Ocado is one of the biggest UK companies valued at over 8 billion pounds, it has struggled to generate profits. It has lost millions of dollars in the past few years while spending billions of dollars in its ecosystem.

Ocado stock price declined on Wednesday after Tesco published strong annual results and warned about its profitability. The firm warned that the rising cost of doing business would hurt its profits. 

The results came at the same time as the Office of National Statistics (ONS) published strong producer and consumer price index (CPI) data. The numbers revealed that the headline inflation surged to the highest level in more than 30 years.

Ocado is also facing more challenges. The rising cost of fuel will hurt its retail business while the jump of wages will affect its growth. 

With Tesco expressing caution, analysts believe that smaller retailers like Marks and Spencer will have a tougher period. The MKS share price fell by more than 3%.

Ocado share price forecast

The daily chart shows that the OCDO stock price has been in a strong bearish trend in the past few months. The shares have moved below the 25-day and 50-day moving averages. The stock moved below the lower side of the descending channel that is shown in purple. The MACD has moved below the neutral level. 

Therefore, with challenges rising, there is a likelihood that the stock will continue falling in the near term. A move above the resistance level at 1,300p will invalidate this view.

Where to buy right now

To invest simply and easily, users need a low-fee broker with a track record of reliability. The following brokers are highly rated, recognised worldwide, and safe to use:

1. Etoro, trusted by over 13m users worldwide. Register here >
2. bitFlyer, simple, easy to use and regulated. Register here >

*Cryptoasset investing is unregulated in some EU countries and the UK. No consumer protection. Your capital is at risk.