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Ocado Surges to Five-Month High with Profitable Return and Stable Guidance

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Ocado Shares Surge as Company Reports Return to Profit

Positive Financial Results and Growth in Technology Solutions

British online supermarket and technology group, Ocado, saw its shares surge by 15.3% on Tuesday following the release of its first half financial results. The company reported a return to underlying profit, with earnings before interest, tax, depreciation, and amortization (EBITDA) of £16.6 million ($21.7 million), compared to a loss of £13.6 million in the same period last year. A significant factor in the company's positive performance was the growth in its Technology Solutions business, which saw a revenue jump of 59%.

Potential for Global Expansion and Licensing Opportunities

Chris Beauchamp, chief market analyst at IG Group, noted that the surge in Ocado's Technology Solutions business highlights the potential for the company to license its technology to a global audience. He emphasized that Ocado's market potential extends beyond being just another UK supermarket. With Ocado's three divisions - Ocado Retail, UK Logistics, and Technology Solutions - the company is well-positioned to expand its reach and partner with retailers worldwide.

Steadfast Financial Guidance and Positive Outlook

Ocado maintained its financial guidance for the year, which was initially provided in February. This steady guidance, along with the company's solid financial results, has received positive feedback from analysts. Jefferies analysts described the results as solid and praised the company for reducing cash burn while reiterating its full-year 2023 guidance.

Ocado's Stance on Takeover Interest

Addressing speculation of a potential takeover by Amazon, Ocado's founder and CEO, Tim Steiner, stated that the company is not actively seeking to be acquired. While acknowledging the responsibility to consider offers seriously, Steiner emphasized that pursuing a takeover is not a priority for the management team and the board. This statement comes after Ocado's shares surged in June following reports of possible bid interest from multiple U.S. suitors, including Amazon.

Opportunities and Considerations for New Businesses

The recent surge in Ocado's shares and its return to profitability have important implications for new businesses in the online supermarket and technology industries.

One noteworthy aspect of Ocado's success is the growth in its Technology Solutions business. This growth not only showcases Ocado's potential to expand globally but it also offers licensing opportunities to other businesses. For new companies looking to enter the market, partnering with Ocado or utilizing its technology could provide a significant advantage in terms of operational efficiency and customer experience.

Furthermore, Ocado's ability to maintain steady financial guidance and positive outlook despite uncertain market conditions is commendable. This demonstrates the company's resilience and strategic planning, which are important qualities for any new business to possess. By carefully managing cash flow and consistently setting achievable goals, new companies can establish a foundation for long-term success.

However, it's important to consider Ocado's stance on takeover interest, particularly in light of potential competition from giants like Amazon. While Ocado may not actively seek to be acquired, it's essential for new businesses to be aware of the ever-evolving dynamics of the industry and the possibility of disruptive competitors.

In conclusion, the success of Ocado presents promising opportunities for new businesses in the online supermarket and technology sectors. By leveraging the potential for global expansion, strategically planning for growth, and closely monitoring the competitive landscape, new companies can position themselves for success in an increasingly digital and interconnected world.

Article First Published at: https://www.cnbc.com/2023/07/18/ocado-hits-five-month-high-after-return-to-profit-keeping-guidance.html

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