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TODAY'S OTHER NEWS

Purplebricks is hugely successful despite tumbling share price says analyst

A PropTech analyst insists that the tumbling share price of Purplebricks on the London Stock Exchange does not indicate that the agency is anything other than a success.

Purplebricks’ share price at the start of the Easter long weekend was 125.6p - up from its 100.0p launch in December 2015 but barely a quarter of its 498.5p high of July 2017; in recent months it has been falling gradually, with few exceptions.

Mike DelPrete - former head of strategy at the portal Trade Me in New Zealand and a long-standing analyst of portals and online estate agencies in the UK, the United States and elsewhere - admits that Purplebricks has recently been on the receiving end of adverse market conditions.

“The stock price is significantly down from the highs of last year, the US and UK chief executive officers are out, and revenue guidance has been repeatedly downgraded” he says.

However, DelPrete describes stock market trading as “irrational” and says that while Purplebricks' stock has faced a turbulent three years “its underlying revenue has consistently grown by impressive margins.”

He insists the 2017 share price high was driven “by unrealistic optimism for international expansion, on the back of 100 per cent growth in the UK. In 2018 it was clear international markets were a tough nut to crack, while UK growth slowed considerably.”

And he insists: “It's a mistake to confuse Purplebricks' stock price with its overall success. The only challenge facing the UK business is growth, which is clearly slowing down as the company saturates the market. All online agents are not doomed to failure because of some fundamental flaw.”

The analyst says market share “can only get so high” and suggests that it is unrealistic to assume this will go ever-upwards for the hybrid agency.

DelPrete - who last summer revealed he had played “a small part” in Purplebricks’ acquisition of a Canadian online property listings platform - says the agency’s problems in the US are different. 

“The company recently pivoted its business model in the US, from an up-front fixed fee (paid regardless of the home selling), to a success fee paid only when a home sells -- both at a discount. This move brings Purplebricks squarely in line with the traditional industry it was attempting to disrupt” he says. 

DelPrete continues: “Purplebricks is still dangerous: it has deep pockets, a willingness to spend, and the self-awareness to pivot when things aren't working. I wouldn't count them out of the US quite yet.

“The biggest implication, however, could be the massive amount of money being spent on marketing by disruptive players (over $100 million between Purplebricks and [rival US service] Redfin alone in 2019). And what's the message of that marketing? Traditional agents are expensive, we offer the same service at a discount, use us instead.”

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    Mike Delprete is just trying to preserve his reputation as a prop tech analyst. He's been long on Purplebricks since day one, despite their continued disappointment in market missing results year after year. Not sure if he is taking an unbiased view on the company. Seems he is just trying to keep his creditability and he has done good work covering ibuyers. Purplebricks lost their CEO's in all 3 markets, are losing LPEs and have an uncontrollable burn rate. Even if they raise capital, there model is not sustainable and they don't have any leaders with Bruce brothers. In the UK, LPEs have run for the doors and their CEO.

  • Andrew Stanton Estate Agency Insights Strategies

    Purplebricks share price is dropping like a stone, and there has never been a dividend payment. The American and Australian business is never going to make profit, and it is debatable if the UK division will make more than 4% gross profit on a turnover in excess of 100M +. Delprete has long been an advocate of Purplebricks, but he is backing the wrong horse.
    With increased transparency from Trading Standards based in Powys, and the fact that 50% of Purplebricks vendors pay upfront for a service they do not actually get - the completion of their property. There will either be a call for refunds (so a PPI scenario) or a public warning at point of instruction 'only one in two of Purplebricks vendors get their home sold by Purplebricks, the other vendor gets 'a cake in the face.'

  • Simon Shinerock

    Companies either have an authentic mission or they don’t and PB doesn’t. This can be seen in their negative and misleading marketing as well as their opaque fee structure. Critically this is not a new model, it has tried and failed in the past, ref Seekers ‘the no commission estate agent’. In the final analysis PB et al is simply private sales reinvented and the right price for that is probably about £250 much to low to support a big brand. Finally, the public as well as the many disrupters out there severely underestimate the value added by a good agent and what is involved with successfully selling their own home.

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    "The Emperors new clothes" that is all.

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    Every time I see the purple bricks shares crashing, it is always followed by what I believe is called a dead cat bounce. I dont know a great deal about shares but I wonder if the founders are secretly buying shares to try to stem the rout.

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    I see plenty of PB signs up in my area but haven't yet seen a SOLD for ages. Sometimes a local agent has a sold board next door, and then takes over from PB and then hey presto, another one sold!

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    Here in the US they have been a disaster. They cost me a small fortune by hiring "bottom of the barrel" realtors. See my story at PurplebricksSUCKS.com

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