Ocado got a boost on Monday as Goldman Sachs upped the stock to 'buy' from 'neutral' and hiked the price target to 1,160p from 540p as it assesses the global opportunity following news of the company's partnership with US-based grocery retailer Kroger last month.
"Ocado's announced partnership with Kroger was transformational in our opinion, both in the number of distribution centres Kroger is looking to start building (a commitment to 20 customer fulfilment centres versus one CFC in each of Ocado's three previous OSP deals), and in the validation of Ocado's Smart Platform (OSP) as an online grocery solution with a global addressable market."

GS said that while the share price rose materially on the back of the deal, its analysis at a local market level points to a US opportunity more than double Kroger's initial commitment.

"Analysis of the top 50 food retailers globally points to an addressable grocery revenue pool (not bound by existing exclusivity contracts) of over £250bn, an OSP opportunity equivalent to over 2x Kroger-sized deals," it said.

The key takeaway from the announcement of the deal was that Kroger plans to identify 20 customer fulfilment centre locations in the US in the next three years. CFCs are centralised online distribution centres owned and operated by Kroger using Ocado online grocery specific hardware and software.

Under the agreement, Ocado will fit out Kroger distribution centres with its own - owned by Ocado - robots and picking stations specific to Ocado's online grocery solution as well as providing the end-to-end online grocery operating platform.

At 1430 BST, the shares were up 6.9% to 1,068.50p.

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