Quest: Shares in Ocado are overvalued by 46 per cent
Analysis firm Quest has delivered another slap in the face to Ocado, as the grocery delivery firm attempts to justify its £1.1bn IPO valuation to investors.
The Collins Stewart subsidiary says it values shares in Ocado at just 128p – a staggering 46 per cent under the mid-point put forward in its prospectus.
It says Ocado must convince investors it can grow sales at 19 per cent a year for the next 10 years and sustain returns almost twice those of Tesco to justify a mid point valuation.
Quest says Ocado, which is a capital intensive business, will never generate the same level of returns as its rivals. The analysts used complex models to reverse engineer the levels Ocado would have to hit to justify its monster valuation.
The update concluded with the warning: “Unlike its chilled delivery vans, Ocado’s IPO is too hot to handle at a valuation of 200-275p.”
Ocado embarked on a two week roadshow on Tuesday. The firm, which recently signed a 10-year contract to deliver Waitrose food, said it is hoping to raise £200m.
Analysts have been lining up to take a swipe at the firm and it was dealt a further blow on Wednesday when Amazon launched a rival grocery delivery business.