Are Ocado shares a ‘buy’? Citi seems to think so

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Investment bank Citi has taken a deep dive to look at the long-term potential of Ocado PLC (LON:OCDO), the online grocer and fulfilment specialist.

It suggests the group has the potential to move into “adjacent non-food solutions” that could enhance the value of the business.

Indeed, Citi has used its in-house tool, VAL-BOT, to gaze into the crystal ball to assess what the future might look like if Ocado does decide to expand horizontally.

Its ‘bull/blue-sky’ assessment of how much the shares could be worth under certain future scenarios ranges from GBP43-GBP72, which compares with GBP24.57 currently.

The ‘bear case’ puts a GBP15 valuation on Ocado stock. Citi’s current price target is GBP29.

Barclays Capital in a recent note gave the counterbalancing argument, saying the current Ocado stock market rating was ‘excessively generous’.

However, it added that it was “hard to be scientific at this still-early stage” of the company’s development.

Barclays, which rates Ocado ‘underweight’, values the shares at GBP16 each.

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