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Ocado shares have gotten off to quite the start in 2019. Opening at £8.14, the stock – which was the best performing FTSE 350 firm in 2018, despite a significant drop-off in the second half of the year – overcome an early February wobble en route to a current trading price of £11.29.

That’s the best price since the end of July, and leaves Ocado shares very close to the all-time highs struck in the months that followed the announcement of its Kroger deal last May.

February 5th saw Ocado release its full year results. While group revenue rose 12.3% to just shy of £1.6 billion, the stock saw its pre-tax losses widen to £44.4 million due to the firm’s ‘continued investment’ in its future and the ‘increased depreciation charge’ from its new customer fulfilment centres.

Quickly, however, the supermarket drew attention from those results with the announcement of a potentially game-changing deal. On February 27th Ocado and Marks & Spencer revealed the creation of a 50/50 joint venture, trading as Ocado.com and costing M&S £750 million.

The merger of sorts combines the ‘highly regarded branded food and beverage range’ of M&S with Ocado’s ‘own label and third party branded products’, and will come into effect by September 2020, replacing the online supermarket’s long-standing agreement with Waitrose. The switch also means Ocado would no longer incur sourcing fees payable to Waitrose, which in 2018 cost more than £15 million.

Investors may be after some further details on the M&S tie-up on Tuesday; whether they’ll be readily available, however, is unclear. As for the Q1 figures themselves, a continuation of the double-digit sales growth posted in 2018 is required, given the stock’s recent surge. Any word on another international deal would also be more than welcome.

Ocado shares have a consensus rating of ‘Hold’ alongside an average target price of £8.57.

This article is brought to you in association with Spreadex. All opinions expressed in this article are from the author and do not necessarily represent the opinions of The Armchair Trader. You can find out more about Spreadex products and services here, or find more articles from Connor Campbell here.

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Connor Campbell

Connor joined Spreadex in 2014 as part of a newly expanded financial analyst team after graduating from the University of Southampton with an MA in English. His focus is on providing Spreadex's customers with up-to-date and informative news, and is responsible for the market analysis found on the Spreadex website.

Connor produces three daily market updates, a daily stock earnings preview, a weekly financial market preview piece every Friday, a round-up of all the big financial stories making the weekend press every Monday morning and regular stock market features.

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