Analysts believe the weakness in Ocados share price reflects a lack of confidence in its future earnings potential

Analysts believe the weakness in Ocado's share price reflects a lack of confidence in its future earnings potential

Shares in UK online retailer Ocado slid to a new low today (19 August), just a month after the grocer launched its IPO.

The company's stock stood at 163p (US$0.255) when the company made its stock market debut last month, however shares slumped to 140.25p at 12.31 BST today (19 August).

Ocado had cut its target price to 180p less than a day before the retailer was due to list after not enough investors accepted the initial range of 200p to 275p.

Verdict Research analyst Neil Saunders told just-food that the weakness in the share price reflects a lack of confidence in Ocado’s future earnings potential and underlines continued worries over the profitability of the business model.

“While I believe investors are confident that Ocado will grow sales, especially when the development of their new warehouse is completed, there is more of a question mark over underlying profitability,” Saunders said.

“This fuels the view that even at the lower rate at which it floated, the company was still overvalued,” he added.