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.”