Ocado shares plummet 30% in 2 months! Is it one of the best stocks to buy now?
The best stocks to buy are often the companies with hidden value that most investors overlook due to their unpopularity. And Ocado (LSE:OCDO) definitely fits within the ‘unpopular category’ right now, with its share price tumbling another 30% in the last two months, even after already crashing by almost 90% since March 2021!
What on earth’s happened? Is this business really on the verge of collapsing? Or is the market overreacting and, in turn, creating a potentially lucrative buying opportunity?
Yet another sell-off
Sadly, the pressure on Ocado shares isnât entirely unjustified. With its current warehouse automation technology proving economically unviable at scale, one of the firmâs largest customers, Kroger, announced it was closing three Ocado-powered customer fulfilment centres (CFCs).
In January, these closures took place, resulting in Ocado losing $50m in expected fee revenue during its 2026 fiscal year (ending in November) and beyond. Then, to make matters worse before the end of the month, another key customer, Sobeys, announced it too was closing one of its CFCs in Canada, lowering expected fee revenue by another £7m.
Nevertheless, even after the loss of Sobeys, management reiterated its goal of turning cash flow positive by November 2026. So you can imagine the horror when just one month later, Ocado released its 2025 results that stealthily changed the goal posts.
While the firm’s still expected to turn cash flow positive later this year, its full 2026 fiscal year will still see a £200m total outflow, with its first full year of positive cash flow pushed back to 2027.
Pairing that with delays in the opening of new CFCs alongside no new major contract wins, it isn’t surprising to see shareholders jump ship.
Needless to say, the situation looks dire. Yet, as previously mentioned, aggressive sell-offs can create tremendous long-term buying opportunities. And this is where things get interestingâ¦
Ocadoâs hidden value
Despite all the frustrating setbacks, Ocado has actually delivered on a crucial milestone that most investors are overlooking right now: its earnings inflexion is real.
Underlying EBITDA in 2025 surged 59%, from £112m to £178m, driven primarily by its robotics technologies, with profit margins expanding from 16.2% to 25%. And looking at guidance, even more earnings growth is expected in 2026 with technology margins reaching 30%.
Meanwhile, while Kroger and Sobeys have pulled back on planned spending, they paid a hefty compensation fee for doing so. As such, Ocado now has close to £740m of cash & equivalents on its balance sheet, providing a powerful liquidity buffer to see it through its journey towards becoming cash flow positive.
Providing that the business does indeed see a full year of positive cash flow in 2027, Ocadoâs financial risk will likely fall drastically. And that sets the stage for a potentially explosive comeback story, if it can start attracting new customers.
Whatâs the verdict?
Good execution combined with continued cost discipline could see this business enter a new, more profitable chapter of its long-term journey. And for investors brave enough to buy, this stock could prove to be a lucrative winner in the coming years.
However, with such a poor track record so far, Iâm not ready to make that leap of faith just yet. For now, I think there are far better stocks to consider buying in 2026.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
