A writer on share price website The Motley Fool has questioned if Purplebricks is trying to follow the Amazon strategy.
Kevin Godbold said: “The US-based mega-company started off as an online bookshop and rapidly grew to sell just about everything.
“Famously, the company paid scant attention to profitability and focused on growing market share. For many years, Amazon remained loss-making but became profitable in the end after growing into a huge business.
“But there’s a big difference between the two companies, in that Purplebricks is operating in a dreadful sector.
“Estate agency is notoriously cyclical and tied to the fortunes of the property market.
“My view is the property market looks dangerous and I see Purplebricks as being in a precarious position.
“Cyclical companies ‘should’ be making hay while the sun shines.
“So, right now, Purplebricks should be stuffing its bank account with cash from strong incoming cash flow. That’s because it will need it to survive the next downturn in the market, the possibility of which stands over the firm like the Grim Reaper, in my view. Sadly, the firm is doing the opposite.”
Godbold describes the latest Purplebricks results as “grim” and said he was glad he had not bought stock.
However, shares finished yesterday at 103.8p after a strong bounce from 95p at the start, having touched 109.2p at one time.
https://www.fool.co.uk/investing/2019/07/03/is-purplebricks-a-turnaround-buy-or-on-borrowed-time/
Comments (5)
Amazon is a pointless example. They invested hundreds of millions building an extensive physical network for storage & logistics/delivery that, once built, has underpinned who they are and what they have become. Amazon is not a service, they are a retailer- PB are not laying the foundations in this way so the comparison is not the same. In fact, a much more applicable ‘aligning’ between amazon and a RE operation would be the recent acquisition of Telford Homes by CBRE. If you want to grow your professional let & manage portfolio- why not buy one of the UK largest BTR developers- now that makes sense!
It does make sense for CBRE .In fact deal of the year .Another USA company seeking to exploit the Brexit dividend .Although extremely disappointed that TEF are selling themselves short to appease the founding fathers
Is the share price being supported in the hope of an impending buyout or because the company’s prospects are so good?
Now we know the beast and it’s “Amazon like way and intent” plus they are closing down Australia and USA and have already revealed the cost of such to the market then I see no reason why the share price couldn’t recover to 180-200p, afterall, fools chased it up to 500p so why not again!
Once bitten…
And those fools were chasing top stock picker Neil Woodford. How’s he doing?