Down 86%, can this FTSE growth stock explode like the value of Rolls-Royce?
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It is clear that Rolls-Royce (LSE: RR) share price has been in good shape for a long time. Go back four years and I could get the stock for just under 40p a pop in the haze created by the lock-in. Fast forward to when I'm writing this and the price is sitting around 530p.
I tip my Stupid hat to anyone who has been able to ride this amazing life. I also ask if there is any chance of another FTSE stock rising from the ashes in the same way.
Share the price crash!
In almost a complete reversal of fortune, Ocado (LSE: OCDO) holders have had a particularly bad run over the past four years. Around the same time that Rolls-Royce was on its knees, the online grocery and logistics provider's share price was sitting high due to purple trading during the pandemic.
In case you didn't know, Ocado's price is now down 86% since those crucial days. That's the kind of movement we can expect in a penny stock!
Rolls-Royce fared better due to the need for return trips and more planes (powered by its own engines) in the sky.
Conversely, sentiment at Ocado is falling as shopping habits return to normal. Lately, investors haven't welcomed news of a slowdown in the rollout of its robot-laden Customer Fulfillment Centers for retail customers.
A lost cause?
I think it's wrong to think that any share price – including Ocado – will go sideways (or worse) going forward. We don't know for sure. And those smart City people too.
In fact, some of the company's recent updates have been positive. For example, the stock rallied in September after management raised full-year revenue forecasts following a 15.5% jump in the latest quarter as customer numbers grew. The company's participation with Marks & Spencer it is now expected to deliver low double-digit percentage growth. Previously, it was expected to be a mid to high single digit percentage.
As an aside, Rolls-Royce's recovery is bound to slow down at some point. Its stock is now changing hands at a (very) frothy forward P/E ratio of 30!
Buyer beware
On the other hand, I'm always wary of any £3.2bn business which, according to its chief financial officer, won't post a pre-tax profit for another four or five years!
It seems I'm not alone. Ocado is currently the third most shorted stock on the UK market. Put another way, several traders are betting that stocks will still fall.
There is a chance they could be wrong and the rush to close their positions can cost the share price. But it's hardly a very encouraging sign.
At the moment, there doesn't seem to be any interest in Rolls-Royce from short sellers.
I'm not holding my breath
Considering the above, I would be surprised if the return is similar to what was seen in FTSE 100 stock would play here. In my view, there are more promising change agents lurking elsewhere in the UK stock market. Some of these may pay dividends while I wait.
Ocado still doesn't suit me.
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