A major article on Purplebricks at the weekend in the Daily Mail said that its “meteoric rise” could be running out of steam.
The Investment Extra article by Paul Thomas is headlined: “Is Purplebricks’ stunning rise built on dodgy foundations?”
The piece said that in just four years, Purplebricks has become one of the sector’s “slickest and most recognisable brands”. Its shares soared more than 450% between stock market flotation in December 2015 and August last year.
But the article says that a concern is that it is pushing into overseas markets “before the UK model is proven”, with shares now down more than 38% from their peak.
The article says that analysts are beginning to ask whether Purplebricks is better at selling homes than other agents, referring to the radio interview where CEO Michael Bruce claimed it sold 88% of its listings.
The Mail article also references the research by Jefferies which claimed in February that Purplebricks sold only 51.6% of listings on its site in November 2016 within ten months.
Thomas adds: “Purplebricks refuses to reveal its actual sales figures, making it difficult to know how many homes it really sells.”
Purplebricks has recently funded expansion by selling 11.5% of its shares to German digital publisher Axel Springer. But, says Thomas, some analysts have queried whether the time is right for a US expansion when “question marks hang over its ability to flog properties here and in Australia”.
Purplebricks told the Mail that it is the only listed estate agency offering substantial sales growth, and that revenue at Countrywide, Foxtons and LSL is flat or falling.
Separately, an analyst has queried whether OnTheMarket is generating enough cash.
Blake Harford, writing on Simply Wall St, has looked at OTM’s free cashflow (FCF) which is what is left after it pays off its expenses.
He concludes that currently OTM “is not able to generate positive FCF”.
However, he said that over the next three years, this is likely to change to an “extremely uplifting” picture.