Rolls-Royce (LSE: RR) has witnessed an astounding performance as of late, with its share price soaring to nearly 530p from a humble 40p four years ago. It’s been quite the ride for investors who have weathered the storm and reaped the rewards of this remarkable recovery. The question now arises – could there be another stock lurking in the shadows, ready to emerge from the ashes just like Rolls-Royce?
Share price crash!
On the flip side of this success story lies Ocado (LSE: OCDO), a stark example of a stock taking a beating over the last four years. With its shares down by a whopping 86% since reaching record highs during the pandemic, Ocado’s downturn is a clear contrast to Rolls-Royce’s resurgence.
While Rolls-Royce’s recovery can be attributed to the revival of travel demand and increased air traffic, Ocado’s decline reflects a shift in consumer behavior as shopping habits reverted to normal post-pandemic. Additionally, setbacks in the rollout of its robotic fulfillment centers for retail clients have contributed to investor pessimism.
Lost cause?
Despite Ocado’s struggles, it’s premature to dismiss the possibility of a turnaround. Recent positive updates, such as an uptick in quarterly revenue and growth expectations from its joint venture with Marks & Spencer, indicate potential for recovery. On the other hand, Rolls-Royce’s stock may be reaching its peak with a high forward P/E ratio, suggesting a slowdown in its upward trajectory.
However, caution is advised when considering investments in companies like Ocado, which may not turn profitable for several years, as stated by its CFO. Being one of the most shorted stocks in the UK market, there are concerns surrounding further decline in Ocado’s share price. While a sudden rush to close short positions could trigger a spike, it doesn’t bode well for long-term stability.
In contrast to Ocado’s uncertain future, Rolls-Royce appears to be a safer bet for investors with no significant short interest in the stock. Despite this, the sustainability of its current growth remains questionable.
Conclusion
While some may still hold out hope for Ocado’s revival, it’s prudent to explore other opportunities in the stock market. The possibility of a similar rebound to that of Rolls-Royce seems slim, given the challenges facing Ocado. As investors, it’s crucial to analyze all factors before making investment decisions and consider diversified options that align with long-term goals and risk appetite.
