Last year was a turbulent one for shareholders in Ocado Group (LSE: OCDO). After racing ahead in 2020 and early last year, the Ocado share price peaked, before crashing spectacularly over the rest of 2021. As a result, the online supermarket’s stock was one of the worst performers in the FTSE 100 index last year.
The Ocado share price soars, then slumps
In 2019, before Covid-19 rocked global stock markets, the share price was on a roll. At the end of 2018, the stock closed at 790p and then rose sharply to finish 2019 at 1,279p. In other words, this FTSE 100 share leapt by 489p in 12 months — a market-thrashing return of 61.9%.
Initially, the Ocado share price had a rough start to 2020. However, as coronavirus infections swept the world in early 2020, global stock markets went into meltdown in the spring. Ocado shares followed suit, crashing to an intra-day low of 994.01p on 12 March 2020, before recovering to close at 1,077p. But as online shopping exploded during Covid-19 lockdowns, Ocado stock shot up like a rocket. After March’s low, the shares rose steeply and, at times, almost vertically. On 30 September 2020, this FTSE 100 stock hit its all-time high of 2,914p, before easing back to close at 2,744p. It then weakened to close at 2,287p on 31 December 2020.
Last year started positively for Ocado shareholders as the stock surged to hit its 2021 intra-day high of 2,888p on 3 February , before closing at 2,846p. However, after this, it was pretty much all downhill for the Ocado share price. Indeed, after peaking in early February, the stock crashed brutally, losing almost half of its value during the remainder of 2021. At its 2021 intra-day low, the stock collapsed to just 1,545.32p on 12 October, before rebounding to close at 1,649.5p. After this, Ocado stock ended the year little changed, closing out 2021 at 1,678p.
From the end of 2020 to end-2021, Ocado stock collapsed from 2,287p to 1,678p. That’s a loss of 609p — a crash of 26.6%. By contrast, the FTSE 100 index gained 14.3% — both figures exclude dividends. Thus, by my reckoning, this makes Ocado one of the worst performers in the FTSE 100 in 2021.
What caused this FTSE 100 stock to crash?
I believe that three factors drove the Ocado share price steeply lower in 2021. First, the shares were driven higher by optimism over boosted revenue growth due to UK lockdowns. However, as Covid-19 infections declined and vaccination programmes were rolled out, this initial optimism was replaced by pessimism over Ocado’s growth. This translated into selling pressure, sending the FTSE 100 stock lower.
Second, as a go-go growth stock, Ocado enjoyed a premium rating broadly in line with highly rated mega-cap US tech stocks. However, as bond yields rose during the year, growth stocks slid, thanks to their increased sensitivity to higher interest rates. When investors realised the US Federal Reserve and the Bank of England would raise interest rates to combat rising inflation, they switched from growth to value stocks. Again, this ultimately had a negative impact on the Ocado share price.
Finally, Ocado’s quarterly results showed that its previous hyper-growth dropped off as 2021 progressed. Halfway through the year, revenue growth had slowed to 21.4% — far lower than in previous half-years. In summary, these three factors combined to drive down this FTSE 100 stock steeply in 2021.
Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Ocado Group. 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.
