Market Report: City takes Ocado off the shopping list
Could the demand for online grocery shopping be starting to slow? Ocado – a company whose raison d'être is to persuade us to swap supermarkets for shopping while on the sofa – will certainly hope not, yet City voices were yesterday talking down the likelihood of it becoming widespread.
Warning that online grocery shopping remains "a niche service", analysts from UBS claimed they were "struck by the lack of persuasive evidence of a tipping point towards mass-market adoption... despite helpful technological developments".
They pointed out that although broadband penetration in this country has risen from 10 per cent to almost 80 per cent in a decade, internet grocery shopping still has a market share of just 3 per cent, while they also said some "indicators suggest growth rates may be moderating".
To add to the gloom for Ocado, the scribblers warned its rival Waitrose "appears to be becoming a more credible competitor", and at the same time claimed consensus forecasts in the Square Mile for next year were too high.
With all that bearishness, it was no surprise they decided to downgrade their advice on Ocado to "sell" and also cut their target price by more than 50 per cent, lowering it to 51p from 110p. In response, the company was among the worst fallers on the mid-tier index, sliding back 3p to 73p – that's a long way from its 2010 float price of 180p a share.
The FTSE 100 managed to rise for the fifth straight session by the skin of its teeth, closing a mere 5.59 points ahead at 5,851.51 to set a new four-month high. Data from China showing inflation dropped to a 30-month low in July helped, with the figures boosting hopes the country's government will introduce further stimulus measures.
Aviva edged back 1.5p to 316.7p after admitting it had written down the value of its US operations by £876m, resulting in the insurer suffering a £477m pre-tax loss over the first-half of the year. With much speculation recently the business could be included in its disposal plans, Investec's Kevin Ryan, argued the impairment charges "suggests a sale [of the unit] sooner rather than later".
After much worrying over how ITV will have suffered during the Olympics, scribblers from Liberum Capital said they were picking up encouraging noises for the Britain's Got Talent-broadcaster regarding next month. "Initial feedback from a major media buyer suggests September has seen a rebound in advertising for ITV," they claimed while keeping their "buy" advice, as the group advanced 1.95p to 83p.
Elsewhere among the broadcasters, BSkyB was 9p better off at 752p after learning on Wednesday evening that it had won its appeal against Ofcom's 2010 decision to order the company to cut the amount it charges rivals such as BT and Virgin Media to show Sky Sports 1 and Sky Sports 2.
BT responded to the defeat by retreating 5.8p to 215.9p, while Virgin Media finished 14p weaker at 1,752p, although Liberum's Lawrence Sugarman claimed the latest ruling "will almost certainly be appealed, and we are still some way from a final decision".
Standard Chartered's recovery from the damage caused by money-laundering allegations was still ongoing – after adding 7 per cent on Wednesday, the bank ticked up another 47.5p to 1,363p, although its share price has still lost 13 per cent since US regulators made the accusations.
At the other end of the Footsie, Amec was knocked back 56p to 1,103p in reaction to its first-half results as the engineer warned its margins would not rise as much over the second six months as during the same period last year.
News of a joint venture agreement with technology giant Samsung saw BGlobal power up 1.5p to 10.62p on Aim. However, the energy meter maker warned the tie-up was conditional on, among other things, "a firm order from a UK energy supplier for the smart energy solution".
Bellzone Mining was pushed up 0.25p to 15.25p after striking a deal with Glencore (up 6.9p to 344.8p) that will see it sell its share of iron ore produced from the Forecariah mine in Guinea to the commodities trading giant.
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