Don’t buy shares in Purplebricks, warns City analysts

Analysts at Jefferies have warned that online estate agent Purplebricks is set to underperform, despite being backed by investors such as fund manager Neil Woodford.

In a note yesterday, Jefferies said: “Whether people buy or sell their homes through Purplebricks, we don’t recommend that they buy shares in the company”, though it said the business should be praised for reinventing the franchise model.

It said that “this early stage disruptor has yet to prove the efficacy of its business model. Should it stumble, the share price may do likewise”.

It said that Purplebricks’ costs would have to increase in order for sales to rise, but Jefferies noted that the business model at Purplebricks was about listings, not sales.

“The numbers in the business model look very attractive, however it is our view they don’t add up.

“With no reward for actually selling a home, all eyes are focused on winning instructions, especially if Local Property Experts want to get close to the advertised On Target Earnings,” said Jefferies, whose coverage of Purplebricks started yesterday.

At the same time, Jefferies upgraded Zoopla to a ‘buy’.

The analyst, which advised Zoopla on its flotation, said Zoopla’s strategy “is logical and commercial and it is working”.

 

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25 Comments

  1. Typhoon

    Coffee -wake up – smell – and- the.

    Thank God someone’s done it last!

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  2. Robert May

    City speak for sell!

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    1. PeeBee

      Sensible speak for DUMP, more like…!

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  3. marcH

    If I was an investor waking up to this news this morning I think I’d be dropping (purple)bricks right now…..;)

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  4. Property Paddy

    HA hA ha ha ha ha ha ha ha!

    Bonk!

    Just fell off my chair.

    Gravity effects me and now it’s gonna do the same thing to PB share price.

    I think I’ll fall off my chair again !

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    1. Property Paddy

      Affects !!

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      1. Robert May

        It’s not gravity that will impact the share price, more likely the little kid at the back sniggering “Look at the King, look at the King, the King is in the altogether”

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  5. PeeBee

    **STOP PRESS**

    City analyst finally reacts to the echoes of what people who know our industry have been screaming from the rooftops for many, many months…

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    1. agent orange

      Hi PeeBee,

      ive just had a family frield contact me to ask some advice on their house sale (as we all get) she started with “we have been on with PB. For 2 months now and any had 2 enquiries, is the market tightening up?”

      And there lies the problem, we in the industry all know that it takes more than an advert to sell a house, but until the public realise this, companies like PB will continue to prosper by offering a free lunch. What we should be doing is collectively getting our heads together to  find the reverse marketing campaign to the PB/Tepillo/housesimple etc campaign of “its easy to sell yur house, just pay us 700 quid and its all done.”

      ps sorry for bad spelling/grammer – on mobile!

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      1. PeeBee

        I guess we are here, all chipping away at it in our own little ways, agent orange.

        That being said – and I’m sorry to seem like I’m banging on at it again like his BDM (which I assure you I’m not…) – but what a certain Mr May has been working on now for nearly two years has been engineered specifically to help traditional Estate Agency –  to combat what he termed fee erosion and unfair competition from Passive Intermediaries and Call-Centre Agents.

        I’m sure he would welcome the opportunity to discuss it with you.

        Hereby the plug endeth.

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        1. agent orange

          i would be happy to discuss with him or anyone else for that matter. You are right what you say, we all chip away in our own little way but what our industry sorely needs is positive open marketing aimed at “why use a proper estate agent” we must fight back and give the public the information they need to make an informed decision  and this needs to be done way before they decide on which agents to have valuations from.

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          1. PeeBee

            You can get in touch with Robert on Tw@tter.  I have no doubt that Ros would be prepared to act as intermediary but it would just slow down the process of emails flying back and forward.

            I stand to be shot down in flames – but I very much doubt you will regret speaking to him.

            Just set yourself a little time for the task… ;o)

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  6. NeilKMorgan32

    Don’t be too quick to write off the share price. There are plenty of people who don’t understand the market who will buy these shares.  Facebook and Twitter’s numbers didn’t add up but that didn’t stop their shares going through the roof. If Purplebricks keep up the marketing spend and retaining first mover status people will back them based on a bigger fool buying them.

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  7. SJEA

    Oh I love the comment…’ the business model at Purplebricks was about listings, not sales’. 

    Would a company such as Purple Bricks want to spend money on staffing the ‘after sales service’ which is where many of us really start to earn our living, ensuring the sales progress to completion.

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  8. agent orange

    This is good news but why have none of these analysts thought to themselves “what happens to the PB model if/when the market tightens up?

    How will PB fare when vendors need more than just a portal because demand and prices are falling.

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  9. smile please

    Lost almost 5% off their share price today ….

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  10. OverHalfWay

    Don’t worry Bruce Brothers, you can us your own money for once, and then you can Phoenix the business like in the past, if it fails like it seems to with your businesses.

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  11. hodge

    Rule number 1, always check the source and the value. A city trader does not make an expert, just look at some of the fund performances

     

    Press Release

    FOR IMMEDIATE RELEASE

    JEFFERIES REPORTS FISCAL FIRST QUARTER 2016 FINANCIAL RESULTS
    NEW YORK– March 15, 2016 — Jefferies Group LLC today announced financial results for its fiscal first quarter 2016 and a summary of developments in its fiscal second quarter to date.
    Highlights for the three months ended February 29, 2016:

    Investment Banking Net Revenues of $231 million
    Total Sales and Trading Net Revenues of $59 million
    Total Net Revenues of $299 million
    Net Loss of $167 million (tax rate 33.3%), primarily attributable to an approximately $90 million after-tax difference in results this year related to two listed equity block positions, including KCG, and our share of the results of our Jefferies Finance joint venture, as compared to our results from the same items for last year’s fiscal first quarter

    Early indications for the three months ended May 31, 2016:

    Business conditions improved in late February and in the first half of March
    Total Sales and Trading Net Revenues for the first ten trading days are averaging above our recent periods’ mean results
    Investment Banking backlog is above recent levels
    We have recorded $18 million in markups so far this quarter in the two listed equity block positions, including KCG, mentioned above

     
    Rich Handler, Chairman and Chief Executive Officer, and Brian Friedman, Chairman of the Executive Committee, commented: “Our overall first quarter results reflect an exceptionally volatile and turbulent market environment during our first fiscal quarter, although our core businesses performed reasonably, considering the environment.  A quiet December was followed by an extremely challenging January and first few weeks of February.  Almost every asset class, including equities and fixed income, suffered significantly amid concerns about the pace of global economic growth, outflows from the high yield market, forced selling from hedge funds, uncertainty over China, a potential Brexit, and an overall void in liquidity.  New issue equity and leveraged finance capital markets were virtually closed throughout January and February, which resulted in many of our potential Investment Banking capital markets transactions being postponed until some stability returns to the markets.  As we have done through many other turbulent periods in our history, we reduced our already smaller balance sheet to continue to reduce risk during this difficult period.   We are humbled by Jefferies’ quarterly loss and will strive to deliver the better results that our shareholders deserve and Jefferies is more than capable of achieving.

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  12. Beano

    Someone needs to read this; http://minutehack.com/guides/the-beauty-of-bootstrapping-your-business

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  13. hodge

    Beano, I like it.

    Fact is shares fluctuate as a result of trading and betting.  The company does not fluctuate each day like it,s shares.

    Traders want to buy shares in x so sell Y to fund X

    Purplebricks is a bet by investors that they can make money, there is nil sentiment involved.

    But it will be a platform for advertising. generation of conveyancing, and financial services etc. And so long as it,s a sort of franchise then gearing/costs will be low. A bit like the old estate agency partnerships, low basic then profit share/dividends.

    As agents we/you have missed a trick.

    1. we now appoint solicitors who have tracking online and thus taking away the old agency communication element or service element to a degree.

    2. We arrange loads of mortgages in house so that is tracked by the mortgage advisor

    3 The poor in the middle agent now has to sell service when 2/3rds of the service has been given to a 3rd party and so fees are harder to justify.

    4 which leaves lettings….still labour and legally intensive so fees are high and can be justified.

    We all follow and it,s hard not to, but sometimes going it alone does not make you wrong

    .

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    1. Robert May

      You’ve missed out the valuable bit,

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  14. Woodentop

    Told you so for so loooong. Meanwhile who are the fat cats with the big salary? It also raises issues over trading and share price with the watchdog. I’m sure there are more than one investor who may feel they have been dupped … there is a specific bit of criminal legislation to cover that and one can only wonder where this will all go from here if this should be the case. Never been able to get my head around the true value of a company that has little assets to be worth £millions. Just like pyramid selling was a con!

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  15. Property Paddy

    Trading between £1.25 to £1.30

     

    Still falling !

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  16. Cardiff Agent

     


    PRICE AND VALUE
    “It is unwise to pay too much, but it is worse to pay too little. When you pay too much, you lose a little money … that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the things it was bought to do. The common law of business balance prohibits paying a little and getting a lot… it cannot be done. If you deal with the lowest bidder, it is well to add something for the risk you run… and if you do that, you will have enough to pay for the something better”.

    John Ruskin

     

     

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  17. Peter

    I have a business suggestion for PB – why not upsale, by offering a “property sale” package and charge a for the service.

    It’s a no brainer, if PB can con people to instruct them on their “give us your property” package, well, how hard will it be to persuade the client base to also pay for selling it as well!

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