Analysts at Berenberg Bank have sharply reduced their price target for Purplebricks by over 80 per cent from 470p to 80p, accusing the company of having “flown too close to the sun”.
The investment consultancy has also downgraded the stock from a Buy to Sell rating, prompting a sharp fall in Purplebricks’ share price of around 10 per cent before recovering slightly.
Berenberg says reduced growth in Purplebricks’ core UK market and mounting losses in the US and Australia have revealed the limitations of its business model.
“With slowing growth and accelerating cash burn we believe the group risks being forced to raise additional equity (at a significant discount to last summer’s 360p raise) or reduce marketing spend and abandon the Australian and US operations” the note from Berenberg warns investors.
The bank’s note also says: “Without a significant change in the current strategy, we expect losses and cash burn to accelerate this year and in 2020, when we believe the group will face the choice of either raising fresh equity, or debt, or retrenching to the UK.”
It’s been a volatile first quarter of 2019 for Purplebricks.
It issued a profits warning and lost two senior management figures early in the year, while some of its Local Property Experts have been accused recently of falsifying price reductions on its listings on portals, while its Trustpilot review record has undergone sustained critical attention.
.png)
.jpg){kind=logo}
.jpg)
%20-%20IMAGE%20Client%20Accounting%20%E2%80%93%20what%20are%20your%20options.jpg)
.png)
.png)
.png)
Join the conversation
Jump to latest comment and add your reply
Finally they've woken up!
HARDLY woken up..... I think the city are well aware something is up.... I have been attempting to short the stock for a while and turns out most of the platforms that normally allow it don't allow you to on PB .... when contacting them its because too many people are already shorting the stock.
if anyone knows somewhere we can..... please post.
At last!!! Someone has seen through the smoke and mirrors!
I don't know how PB do outside the UK and know that the investment received so far was on the promise of move into foreign property markets but they will continue to grow in the uk this year then as the number 1 agent cut back the marketing spend the focus will then be on maximising the opportunities that they have, increased mortgage and legal revenue along with a shift to developing the lettings book through acquisition and lettings marketing. Everyone knows that with a low fixed fee you have to eventually step back on the TV adverts when you are at the top and let the boards and the reviews do their job and generate more and cheaper instruction and converting all the buyers of the 6000 properties they list a month into future sellers. The only struggle you will see from PB is where to find a purple Bentley not that their growth from 0- where they are now is slowing once any agent hits 5% plus marketing share the job of growth is done the rest is just organic.
Do you look at their financials and share your thoughts with investors "job of growth is done." Maybe you did, that's why their price target is at 80p. They will implode and have no leadership. Key people (LPEs and senior leaders) in Aus, UK and US already walked out the building.
80p per share is over optimistic, what are they thinking ?
It's just a matter of time until Purplebricks crashes below 80p. LPEs are exiting at a rapid pace in UK while Aus and US struggle with Bruce brother's toxic influence. They lost key people across all markets and Kenny and Michael Bruce are punching above their weight. Kenny is in the UK now getting in the way and Michael continues to negatively influence all areas of the business in Aus and US, despite no experience in these countries with the market. When will the Board and investors step in and bring in adults to run the company and move them out? Paul Pindar, chairman of Purplebricks is trying to rescue his other investment, eve sleep where that stock crashed too.
Purplebricks can’t survive without blowing millions on advertising which is rapidly running out. The business model is flawed and only seems to work by persuading the public that they are ‘better off’ with lower fees. With the advertising budget no doubt running out and the public becoming more aware of their dreadful reviews, lack of customer support, zero sales progression and overall bad reputation I think the net is closing in. Let’s hope so!
I have always thought their charges were very high for what they do. No incentive to get the deal over the line and how can a local property 'expert' have detailed and necessary knowledge of the patch given the size of the area they cover? On a slightly personal note I'm sick to death of these kind of people talking themselves up, disparaging people who have built their companies up through sheer hard work and commitment and of course with their OWN money.
Just brilliant news! About time too. As a good old fashioned estate and letting agent who sold out last year, i am delighted to hear this and wish every other independent High Street agent all the best for the future.
Plenty Commissary now!
“With slowing growth and accelerating cash burn we believe the group risks being forced to raise additional equity (at a significant discount to last summer’s 360p raise) or reduce marketing spend and abandon the Australian and US operations”
Yesterday they had a target of 470p, today 80p. Berenberg are certainly not providing a good service to their paying customers.
The story changed for PB ages ago and even if you just follow the company announcements this was plain to see months ago. They issued a profit warning and reduced the focus for expenditure on L.A. and Florida in the States.
Still a viable business though. UK listing and market share growth negligible at present but like "Online Agent" says there has been increased margins from ancillary sales to both buyers and sellers and PB say there is still plenty of potential there. They also increased their fee from £849 to £899. No need to make a profit, break even is enough - continue the squeeze on their competitors who now face the letting fee ban, spend what comes in on marketing and see what happens.
Further investment for the USA not out of the question.
'Still a viable business though'. Come on Cyberduck, even you can't put lipstick on this pig.
Like it or not Property Pundit, they are still maintaining a similar number of listings in the UK with fewer LPEs. Increased the fee (how many traditional agents have done that lately?) and have increased ancillary income and claim still plenty of opportunities here.
M&S, Tesco and even Foxtons have tried and failed overseas. No implosion for those companies. £50M finance raised for the express purpose of entering the US market. Then a further £125M raised with most of it earmarked for accelerated growth in the USA.
80p a share is a market capitalisation of around £300m. Not what I'd call a pig. Woodford's initial investment was £7m for 30% of the company.
Could be wrong but I see PB being around for a long time.
80p could still get you over 10 countywide shares today less than 8p and that's not forgetting Purplebricks share price is currently 130p (16 shares) lol the article is just ea click bait
As estate agents, we need to focus on what we do well at not what PB and other online do. There is still a massive market for the high street to go at.
As x PB every val i went on a high street agent had mentioned PB when that appointment is for you to showcase why you are better not why someone should not use pb
Oxford English Dictionary. “..a fee is classed as a commission” no idea how the advertising bodies let them away with saying it’s not. No smaller agents would!
Agree with you on that should be fair fixed fee, they are not free
Who remembers Tepilo now?
John Lawson come on. No matter how you try to position the business, it's failing miserably. Woodford made money fair (loss millions from high), but how about Axel Springer who just invested last year you are referencing (£125M) at 375p and now the stock is at 129p, down 66%! How about all the LPEs underpaid that were fooled by the Bruce brothers with the promise of fortunes (stock options) that have no value today. Michael and Kenny Bruce brothers sold and made millions pulling the stock lower. PB will be out of business unless purchased by a foolish buyer. Not sure their rich German uncle wants any more of this dog.
Justin,
>Not sure their rich German uncle wants any more of this dog.
If you read the comment from the investment bank it says...
"we believe the group will face the choice of either raising fresh equity, or debt, or retrenching to the UK."
Retrenching to the UK would be failing overseas. If you class that as failing miserably then fair enough. We just see things differently.
>PB will be out of business unless purchased by a foolish buyer.
That's not what the Investment Bank are saying. They are saying there is an option to retrench to the UK. Did Tesco, M&S and Foxtons go out of business when they ceased trading in the USA?
Why do you think PB will go out of business if they retrench to the UK? That's certainly not what Berenberg are saying, they are saying the company is worth £300m.
Please login to comment