Search Share Prices
Ocado rallies as Peel hunt calls it 'the Microsoft of retail'
Ocado was a high riser on Wednesday as Peel Hunt said that Ocado Solutions has the potential to become the "standard" platform for retail logistics across all sectors as the operating system of retail.
"Whilst the company is currently focusing on exclusive contracts within the food retail vertical, we would advocate an eventual shift in its focus towards becoming the open industry standard; just like the Windows operating system, which has more than 80% market share as it didn't restrict itself to just IBM manufactured computers."
The brokerage, which hiked its price target on buy-rated Ocado to 1,700p from 610p, called it "the Microsoft of retail".
It argued that niche, closed, exclusive platforms like those from Apple lead to a quick rise, but eventual stagnation, whereas generic, open, standard platforms like Windows and Android supersize.
Peel Hunt said Ocado should adopt Microsoft's approach. It pointed out that in the 1980s, both Microsoft and Apple released their first graphical user interfaces but while Windows was available for all manufacturers of PCs, MacOS was only available on the Mac.
It said the benefits of Microsoft's approach are clear: higher penetration, stronger control, and greater revenue.
"In 2016 alone we postulate that for the top 100 store-based retailers with revenue of $3.4trn, Ocado could tap a portion of those companies' annual capex budget, an estimated $89bn in total. On a 15-year view, this takes us to a £10bn valuation for Solutions."
At 1120 BST, the shares were up 4% to 986.60p.