Is this one of the worst FTSE 100 stocks to own in 2022?

2022 has been a pretty disastrous year for many FTSE100 stocks. While the index has been relatively flat overall, some of its constituents have not been so lucky. Y ocado (LSE:OCDO), in particular, has tanked with a 65% drop in share price in the last 12 months. In fact, it is one of the worst performing stocks in the index so far this year.

Although I do not own any shares, I have been bullish on this business for the past several years. So is this a case where short-term problems are dragging down a potentially great company? Or is my theory broken? Let’s take a closer look at what’s going on.

What happened to these FTSE 100 shares?

The Ocado Smart Platform (OSP), its business-oriented robotic warehouse automation solution, has performed admirably. This part of the business was the main focus of my investment idea and now has 11 industry leading partners in nine countries around the world, with 16 online customer service centers.

According to the latest interim results, the group’s international OSP revenue has more than doubled. Meanwhile, the fees generated by its logistics operations in the United Kingdom grew by 8.9%.

As more businesses seek to cut costs, the ability to automatically process and fulfill customer orders is growing in demand. And based on the performance delivered so far, Ocado seems to be hitting the mark. So why are these FTSE 100 shares selling?

The problem lies in its retail division. Despite heavy investments in robotics, Ocado remains first and foremost an online grocery store. At least in terms of income. And since the height of the pandemic, growth has failed to meet expectations.

After lockdowns were lifted, consumers began to venture back into physical stores. As such, the company lost its tailwinds and was unable to maintain all of its newly secured market share. This downward trend in growth continued throughout 2021. And now, in 2022, with inflation driving up prices, customer spending continues to fall.

The online store continues to attract new customers with a total of 946,000 active members. And this has pushed up the average weekly orders. But with the pressure of inflation on spending, the size of the baskets has decreased, which has caused a decrease in income. Combining that with ever-increasing losses from rising costs, the result is a massive drop in Ocado’s share price.

To buy or not to buy?

As a platform, Ocado looks excellent, in my opinion. The growing number of clients on both sides of your trade shows that you have something valuable to offer. And with more members joining their ecosystem in a post-pandemic world, it’s clear this wasn’t just a Covid action.

However, as a business, Ocado has a long way to go. The international OPS is making solid progress, in my opinion. But it is still a small part of the overall operation, contributing only 4.6% of the revenue stream. And with rising costs for dry ice and electricity, the road to profitability seems to be getting longer.

In the long term, I still believe that Ocado can become one of the best performing stocks in the FTSE 100. But a lot has to go right for this to become a reality. For now, I think this stock is worth returning to my watch list until a shorter path to positive gains materializes.