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.