Will my big bet on Ocado shares pay off as they jump 11% in today's results?

On the 22nd of July I decided Ocado (LSE: OCDO) shares suffered enough, and added an online grocery and logistics group to my portfolio.

Four days later, I doubled down and bought more. I knew Ocado was dangerous, but I decided it was too much power, if I could stop the volatility.

I bought my first stake in 401.6p. That's a whopping 86% off Ocado's peak price of 2,808p, back in February 2021. My second stake cost me 432.3p. I quickly found myself down 20%.

FTSE 250 stocks with the biggest potential (and risks)

Luckily, I was prepared for a tough ride. As I wrote on 24 July, Ocado shares are at the mercy of investor sentiment. “If markets feel confident in terms of the economy, they are jumping. When investors feel depressed, they die. “

And so it has been proven. A simple broker update can send stocks into a spin. When the team publishes the results, it's time to bond.

I logged into my trading account and found my Ocado holding jumped 10.87% this morning after a good set of third quarter results. Although in terms of its volatility, the stock is still down 54.4% over one year.

Ocado has upgraded its earnings guidance after Q3 revenue rose 15.5% to £658m. Total units sold rose 15.4% to 249.9m, while average orders for the week rose 14.7% to 437,000.

The board now guides for low-double-digit sales growth in the year to December 3, up from July's guidance of mid-to-high single-digit growth.

Ocado now has more than a million active customers, up 10.3% in the quarter, while receiving more orders as it expands delivery locations.

One of my favorite growth stocks

There are still big risks attached to Ocado, which has been losing money for years. Revenue rose again to £2.825bn in 2023, but still posted a loss of £403.2m.

Ocado is set to make a loss in 2024 again, having posted a first-half pre-tax loss of £154m. However, that was down from £289.5m a year earlier.

We may be over the cost of living crisis, but consumers are far from throwing money away. Ocado was forced to cut average retail prices by 0.4% last year, at a time when UK grocery prices rose by 2%, to show it can compete on price. If consumer sentiment falls, Ocado's shares will fall sharply. It is what it is.

I'm quite partial to its richness (by my standards), so I won't be buying more. Chances are good that the share price will drop anyway, once the dust settles on today's results.

However I still believe that from a long-term perspective, Ocado is one of the hottest UK growth stocks around. I hope my stomach can survive this trip.