In the last 12 months, Okado (LSE: OCDO) The worst performing component in the FTSE 100 index, the share price fell just 40% at the time of writing. Here’s why I’m considering it as an opportunity to buy.
It’s not a grocer …
Okado is the fastest growing grocer in the retail UK market. Sales increased by 5% in 2020. In September, Microsoft Not only has Okado Retail partnered with it, it now has a 50% stake. The growth of the online supermarket is not just on Okado’s shoulders but it is now the key to M&S’s growth plan, and the two companies will work together to promote and expand the business.
Can Ocado sustain its sales and customer acquisition growth? Lockdown restrictions have been relaxed, reducing demand for groceries online, while the Okador Erith warehouse has a variety of supply chains, including a fire in July, which has caused severe disruptions, delays and frustrated customers.
However, I believe that the main driver of FTSE 100 stock growth has little to do with the online ecommerce website.
Okado Smart Platform (OSP)
OSP enables partners to develop scalable and profitable online grocery businesses through innovative robotic solutions and automated customer fulfillment centers (CFCs). Okado is building the warehouse of the future with the potential to expand beyond the grocery sector.
Okado Retail is using the CFC of the Okado Group, which means that as the online supermarket grows, so will the Okado Group. It has ties to 10 grocery businesses across four continents including Krager, The second largest grocer in the United States through market share.
OSPO is responsible for the decline in Okador’s share price in 2021 because of the collision between three robots at Okador’s Arith CFC, which caused the aforementioned large-scale fire. Although similar incidents in the future do not bother me in the long run, space competitors, especially Amazon. So can the FTSE 100 edge the company?
Cultivation of the future
With rapid population growth, climate change and increasing arable land, agriculture needs to be developed and modernized to be sustainable for future generations. The Okado Group recognizes this and is distributing it to vertical farms as a potentially profitable solution. It has made several investments, including a 58% stake in Jones Food Company, Europe’s largest operating vertical firm.
Vertical cultivation can optimize plant growth and reduce water use, and Okado plans to identify them in or near their CFCs. It will see a future where the newest, most durable products can be delivered to the customer’s kitchen within an hour of picking.
Vertical farming is significantly more expensive than conventional farming, but it is clear that a solution is needed to avoid the food crisis, and it could revolutionize our growth and food purchases.
This is a long-term growth game
Short-term problems have caused its share price to crash but the FTSE 100 component is seeking to change the way it buys worldwide, for better and better. Like any growth stock, I prepare myself for short-term-medium volatility but I believe in the company’s growth potential. Ocado has been on my watchlist for a long time but after a sharp fall in share prices over the past 12 months, I see today as an opportunity to buy it for my portfolio.
John McKee, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of the board of motley flowers. Nathan Marx has no position in any of the shares mentioned. Motley Flowers UK has recommended the Okado Group. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.