Ocado shares have surged this week following a two year slump, as investors bet on the supermarket making a rebound.

BNP Paribas Exane, a French financial company, told its clients the FTSE 100 online supermarket’s “outlook and market sentiment are much better aligned” as a result.

As online supermarket has taken a firmer grip on managing its spending and operating costs, the stock broker has now raised its rating to ‘neutral’ and increased its target price by 3% to 365p.

Ocado profits skyrocketed over the pandemic, as the public increasingly favoured home delivery. However, consumers have since returned to physical stores, causing a decline in e-grocery.

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Its share price hit a record 2895p in September 2020 but has been dropping for the past two years, falling as low as 343p last week.

The group also narrowly escaped being demoted out of the FTSE 100 index in the latest reshuffle.

BNP insisted Ocado still has much to prove and warned the outlook for online grocery “remains challenging to predict”.

The broker added: “We do though believe that having struggled post the pandemic to grow volume and excess capacity, Ocado is entering a more settled phase.”