‘I’d sell Purplebricks shares to buy OnTheMarket’ says analyst

A writer on shares website Motley Fool has said he would rather buy OnTheMarket stock than Purplebricks.

Rupert Hargreaves says he has always been sceptical that Purplebricks can be successful in the long run because the property market “is a very uncertain beast”.

Purplebricks, Hargreaves points out, “has never been tested in a falling market, so we don’t know how the company will perform in this environment.

“But with home prices across the UK starting to slide, we’ll soon find out.”

Hargreaves is also critical that the UK business has helped fund losses while growing the Purplebricks business overseas.

Meanwhile, City analysts are not predicting any profit for Purplebricks for the next two years.

Hargreaves says that with so much uncertainty, he would be a seller not a buyer at current levels.

OnTheMarket, however, is a different matter altogether, maintains Hargreaves.

It is an online property portal, not an agent: “I think this is a much better business model, and one that we know can succeed as proven by Rightmove and Zoopla.”

Traffic to OTM is surging, with over 23.5m visits in January, a new monthly record.

The number of agents using the site has more than doubled in the last year. And last month it delivered more than seven times as many leads as this time last year.

Hargreaves says that Rightmove had an operating profit margin of 73% for 2017, and a return on capital of 1,000%.

“If OnTheMarket can replicate this success, I think there could be significant gains ahead for shareholders,” Hargreaves concludes.

OTM’s update to the stock exchange yesterday also mentioned that both Rightmove and Zoopla listings included developers’ properties – a market which OTM has yet to focus on.

Yesterday, Purplebricks’ shares closed about 1% down to finish at 178p. The OTM share price put on almost 5% to close at just under 100p.

Why I would sell the Purplebricks share price and buy this competitor instead

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22 Comments

  1. NewsBoy

    Looks like a no brainer to me

     

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  2. Hillofwad71

    Maybe Purplebricks /Axel Springer will buy OTMP

    Bricks save on RM costs.

    Increased site  traffic will attract new applicants

    Axel Springer can add expertise /investment and bells and whistles

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    1. Ostrich17

      Axel Springer seems a strong possibility – probably after they have cleared out the deadwood at PB. They effectively have a parallel management team in their recent Canadian/German investments and could easily move these across when needed.

      OTM  represents a very cheap opportunity for them.

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  3. Property Poke In The Eye

    It’s all about OTM.

    The RM beast is going down as there will be further corporate offices closing shop.

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  4. GPL

     

    Share prices? Fickle. Bumpy Ride. Think… Bird Box, Blindfold & buying Shares.

    Talk is free. Buying Shares based on one person’s opinion? Of course! …..if Mr Hargreaves/Motley Fool want to hand me their money, I’ll spend it on their share recommendations!

    Ian? Ian? ……Ian!??? ……that money you owe my company, that you turned into shares, that you told me would be worth £5 per share a year ago? ……it’s worth £1 per share! …….can you give me back the money I’ve lost please?

    No? No?!!! …….thought so!

     

     

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  5. Woodentop

    Purplebricks, Hargreaves points out, “has never been tested in a falling market, so we don’t know how the company will perform in this environment.

     

    If it can’t make money after 7 years … the writing is on the wall for PB and any other agents that has to rely on upfront income to survive. Who can’t see a reducing market means bigger losses!!!!!!!!!!!!!!  As an investor pumping money into a single on-line agent, with the information that is there for anyone to see on how these agents are failing, it is nothing more than a high risk gamble to continue. The honeymoon period of uncertainty and potential for quick get in and out share value …. long gone. Those left in are waiting for a recovery … dream on.

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    1. PropertyInvestor68

      https://www.bbc.co.uk/news/business-44721667 Profitable in the UK – not been in AUS or US for 7 years? Your argument is akin to expecting a newly starting branch branch to be profitable after 12 months. If you are going to go on a hate campaign, at least make it believeable.

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      1. Woodentop

        Errr PB has officially declared a loss for every year in THE UK, including yeatr ending 2018. PB has officially declared a loss for every year in Australia and the USA is going that way. Revenue from consumers does not and never has self funded the buisness. Put that in your pipe.
         
        I’m more interested in what they say, frankly confirms they are loosing £26m and still climing each year. You would do better at reading a stock market independent reports and get your head out of the sand.

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        1. PropertyInvestor68

          Can you please link me to their loss making UK accounts, I haven’t been able to find any. Thanks

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    2. Anthonyw

      “If it can’t make money after 7 years … the writing is on the wall for PB” 

      Isn’t OTM in pretty much the same state – not making any money?

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      1. Woodentop

        The risk isn’t anything like the same as PB and m8 above considers early years should not be a reason to complain as OTM have not been a PLC that long. Started in 2015 but only floated in 2018 on the stock market. So where is your evidence it is losing money. Can’t have it both ways? 

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    3. 1TB

      PB founded in UK 2012 is profitable.  What’s your point again?  (#Woodentop #fakenews)

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  6. PropertyInvestor68

    How can OTM be a good investment?

    – About to go/ going into a recession

    – Does any consumer use OTM?

    – Will agents cut cost in a recession? Will they cut Rightmove or OTM?

    I mean, does anybody eat this up? Save your money.

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    1. Woodentop

      OTM is not a consumer business. A recession reduction in properties will not effect OTM as the consumer is not funding the operation. Sounds to me you haven’t a clue what you are talking about. You’ll be telling me, chalk is cheese. 

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      1. Anthonyw

        Think he/she means consumer as in someone who is a consumer of the website. 

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        1. Woodentop

          Maybe he/she can ask one of the the portal consumer visits in January 2019 @ exceeded 23.5 million with  active 1.5 million property alerts?

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          1. PropertyInvestor68

            We all know the vast majority of leads come through Rightmove, you would have to be a trend setter to release RM and keep OTM. Generally people don’t take these risks with their business in a recession. 
            Firstly, Rightmove get 4.5m daily visitors. Also what % of people take a property alert off after they finish searching – I don’t think these stats show the bigger picture. I have set up alerts on OTM and RM and the listing always comes through on Rightmove first.
            https://www.rightmove.co.uk/news/articles/property-news/January-House-Price-Index-Rightmove/
            It’s all just opinions – I just hate these blanket statements from apparent gurus – buy OTM – good news is ultimatley advertising. I just think people should not fall for it and like to do my bit. We are at the edge horizon in terms of house prices – a recession is coming, Wooden top, if you are long OTM – all the best to you.
            And of course I know OTM is b2b, the consumer ultimatley rules all markets though. Why would any business not use a product that is a clear market leader.

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  7. Anthonyw

    This is utter madness! He is talking about investing in the model but then why invest in one that is going in the same direction as RM and Z? There are loads of new ones coming out (I have seen many being plugged on here) so maybe the writer should have stuck to it being about a model rather than OTM. They have already let so many agents down and they have lost trust of many.  My gut feeling is PB will come out on top as they continue to refine their model/offering. They are far more innovative and tick a lot more boxes for investors.

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    1. Woodentop

      My gut feeling is PB will come out on top as they continue to refine their model/offering.  
       
      Lets wait and see who is wrong, the market or you? They haven’t made any changes, let alone refine, over the last 7 years.

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      1. Anthonyw

        Woodentop,
        “They haven’t made any changes, let alone refine, over the last 7 years.”
        I am not well informed on PB and won’t lose any sleep over it if my gut feelings are wrong, but the bits I have seen in the news suggest they have/are constantly changing, adapting and evolving. It is only a matter of time before someone gets (what they and others in the same space are doing) bang on, it might be PB or a newcomer who comes out of nowhere.

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        1. Woodentop

          Politely … that is the problem, far too many people have fallen hook line and sinker on the PB propaganda. The fact is they haven’t offered anything that a high Street Agent doesn’t do, but try an win business on fee. But they offer less in more ways than one. They continue to attack the high street with “commissary” which is misleading and have had their knuckles wrapped more than once in the UK and big fine in Australia by regulators. They refuse to prove how successful they are, the end game for the consumer is, did the property actually sell – PB refuse to confirm! Is it a surprise that the High Street is somewhat annoyed. Stay around for long enough on PIE and you will soon see the wood for the trees. Without the TV campaigns they wouldn’t survive and they are struggling to, by the finger nails? PB share value had dropped recently by best part of 70%, slight recovery and still no dividend for its investors (how long are they expected to wait?)while the directors cash in on massive share dealings and salaries. A bit like those fat cat salaries, the public hate for not being a real success? PB are the same business models the other “on-line only agents” who have gone under but unable to raise the crowdfunding and arguably that is where PB have been a success to nowhere.

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        2. AgentV

          Anthonyw

          It is only a matter of time before someone gets (what they and others in the same space are doing) bang on

          At the moment the ability to get it ‘bang on’ lies with the independent agents, if we can find a way to network and utilise the power we have in market share.

          This is something I am working on currently. Announcement soon hopefully.

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