Another bank has slashed its forecast for Purplebricks, citing concerns over its the long-term viability of its international activities in particular.
As recently as mid-March the Swiss bank UBS cuts its price forecast for Purplebricks’ shares from 305p to 285p but now that lower figure has been slashed to just 100p - the share price at which the hybrid agency launched on the stock market in late 2015.
UBS’s latest worries, expressed in a note to its investor clients, centre on Purplebricks’ position in Australia and America; the bank forecasts that the agency won’t break even down under until 2022 and suggests that the US operation will not see a profit until 2025.
“Operations in Australia and the US are characterised by having very limited visibility on the businesses’ development and break-even horizon – Australia keeps being postponed and losses in the US are expected to worsen”.
It also suggests that Purplebricks may have been the author of its own downfall by changing its business model in Australia from the typical online ‘upfront’ payment to a more traditional-style pay-on-completion option.
“[This has] raised concerns about the future of online agents and the upfront fee model” says UBS.
This is the second investment bank slap-in-the-face for Purplebricks in recent weeks.
A month ago Berenberg Bank sharply reduced its share price target for Purplebricks by over 80 per cent from 470p to 80p, accusing the company of having “flown too close to the sun”.
It changed its stock rating from Buy to Sell, and like UBS is cited mounting losses in the US and Australia as having revealed the limitations of its business model. Berenberg also voiced concern about Purplebricks’ fate in the muted housing market in the UK.
Purplebricks’ share price yesterday remained around the 132p mark - barely a quarter of its 498.5p high of July 2017; in recent months it has been falling gradually, with few exceptions.
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I have always held the opinion that you cannot make a penny out of selling a property, any property for under £1000 when you look at the real costs involved. My belief is that the true philosophy of theirs was to float the company, that's been done and the original investors (pre floatation) have already made their lottery sized sums. Quite a clever concept but one always doomed to fail in the medium term for any regular investors.
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