HomeTechIs this beaten down UK tech stock about to rocket like the...

Is this beaten down UK tech stock about to rocket like the Rolls-Royce share price?


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Nothing on the FTSE 100 can match the Rolls-Royce (LSE: RR) share price. It’s up 198.67% over one year and 404.9% over two years. This is Nvidia territory.

Yet until recently, it was a basket case. Former boss Warren East put a good shift in but the stock didn’t take off until tough-talking new boss Tufan Erginbilgic took over in January 2023.

I felt something brewing and took a small stake in October 2022, and it’s done brilliantly. I’d like to buy more but reckon it’s too late. Rolls-Royce shares now trade at 32.58 times earnings. While the outlook is bright, some of that price is speculation. If I do buy, it will be on a dip. I accept we may not get one.

Next UK growth stock hope

Instead, I’m on the hunt for the next superstar recovery play, and I’m wondering whether it could be Ocado Group (LSE: OCDO).

I know, I know. We’ve all been here before. The grocery retailer/UK tech hope threatened to shoot the lights out for years, but kept on shooting itself in the foot instead.

The Ocado share price spiked to 2,808p in February 2021, after a good pandemic when home grocery deliveries surged. Today I can pick it up for just 355.1p. That’s a drop of 87%. This is remarkably similar to the 86% drop Rolls-Royce suffered between August 2018 and September 2020, from 346.6p to 53.11p.

Rolls Royce was whacked by the pandemic, which grounded fleets and smashed revenues from its aircraft engine maintenance contracts. While it made mistakes of its own, that was out of its hands. To a degree, so was the recovery.

Ocado was also hit by forces beyond its control, as higher inflation and borrowing costs hit investor appetite for risky growth stocks. This erodes the value of future profits in real terms, which brings us to the big problem Ocado can be blamed for. It doesn’t make any profits. 2023 saw yet another pre-tax loss, this one £403.2m. Now it’s now on the brink of relegation from the FTSE 100 after six years.

FTSE 250 new boy

Like Rolls-Royce, Ocado has a combative boss, founder Tim Steiner. His latest spat is with joint-venture partner Marks and Spencer. M&S shares have shrugged off legal threats to go from strength to strength, Ocado only gets weaker. Steiner has struggled to justify his £100m five-year pay package. Almost a third of shareholders voted against that in 2022. I suspect the number would be higher today.

So should I buy this hyper-volatile stock? I appear to have answered my own question. Yet I can’t let it go. The company is ambitious. It takes risks. Those robot warehouses are things of wonder.

Deutsche Numis Securities recently noted that 13 of the world’s “leading retailers are Ocado partners”. If just 20% of their £250bn of annual grocery sales went online, Ocado could earn £2.75bn a year. This would end the Steiner pay row.

The Ocado share price still twitches into life whenever investor sentiment picks up. It could be a major beneficiary when interest rates are cut. But blimey, it’s risky. I’m ready to invest £1k or £2k, just for the ride. Who knows whether I’ll ever see it again. But I’ll kick myself if it does rocket without me.

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