RBC Capital downgrades Ocado, Boohoo
By Michele Maatouk
Date: Thursday 26 Jan 2023
(Sharecast News) - RBC Capital Markets downgraded its stance on online supermarket Ocado and fast-fashion retailer Boohoo on Thursday.
It cut Ocado to 'underperform' from 'sector perform' and slashed the price target to 560p from 800p.
"We continue to view Ocado's technology solutions as industry-leading; however on analysis of the group's cash flow potential, its mid-term targets appear ambitious," it said.
"Moreover, risk of additional financing, a likely slow recovery at Ocado Retail, downside risk to group estimates, a lower probability of further game-changing international deals and a relatively rich valuation lead us to downgrade the shares to underperform."
In a separate note, RBC also downgraded Boohoo to 'underperform' from 'sector perform', keeping the price target at 35p.
"We expect BOO's less competitive service internationally to weigh on its top-line recovery mid-term while benefits from a new US warehouse might deliver later and less than expected," it said.
"Meanwhile, limited scope for price increases, ongoing elevated marketing spend and inefficiencies from a new distribution centre (DC) are likely to weigh on a margin recovery."
RBC said these factors mean its EBITDA forecasts are 21% to 28% below consensus.
"Following the stock's recent more than 100% re-rating, we view valuation as demanding, considering risks of further earnings disappointment."
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