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.