Is the Purplebricks share price heading to 200p?

Should you be selling Purplebricks Group plc (LON: PURP) ahead of further declines? Or is now the time to buy?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

It’s been a rocky few months for investors in Purplebricks (LSE: PURP). The online estate agent has been hit by a wave of negative publicity and, despite its best efforts, management hasn’t been able to stop investors heading for the exit. 

Year-to-date, the shares are down 46%, underperforming FTSE 100 by a shocking 37% over the same period, and that’s excluding dividends.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Including dividends, the stock has underperformed the FTSE 100 by just over 40% this year, a shocking retreat by what was one of the UK’s hottest growth stocks only a few months ago.

What’s gone wrong?

As my colleague Royston Wild noted at the end of last month, it seems the investment community is concerned about Purplebricks’ expansion programme.

While breaking into new markets is never a bad thing, Purplebricks is trying to conquer the world before it has consolidated its position here in the UK. Even though the company does control 70% of the online estate market, the digital market is still a fraction the size of the overall UK market for buying and selling homes. 

Earlier this year, analysts at investment bank UBS claimed that while Purplebricks claims to control a sizable share of the online market, sales on its platform account for less than 4% of the overall UK residential property market. That said, in a trading update issued by the company today, Purplebricks tells investors it has made further market share gains in “what are challenging market conditions in the UK real estate sector,” although it fails to provide exact numbers. 

International growth 

However, the company’s global ambitions should help it reduce its dependence on a struggling UK market. 

Today, management announced yet another international deal, this time in Germany where it’s coupling up with media giant Axel Springer. The two businesses are forming a joint venture to acquire a significant stake in Homeday, Germany’s leading online real estate portal. 

Homeday joins the stable of international businesses acquired by Purplebricks over the past few months, including the Canadian business Duproprio/Comfree.

In addition, the firm is rapidly expanding into the US market. It now operates in seven states across the country. These businesses are still relatively small in revenue terms compared to the UK home market, but there’s tremendous potential here. The US market is the largest in the world for buying and selling homes, and even if Purplebricks can grab just a few percentage points of market share, it could make a significant impact to the company’s top line. 

In the meantime, however, I think shares in the company could fall further before finding support so perhaps we’ll have to wait a while until the share price can hit 200p.

So far, Purplebricks has been unable to prove to investors that it can function profitably and, until it can, I think the market will continue to view the business with a degree of scepticism. After all, international expansion is all well and good, but if the growth doesn’t produce any profit, it’s only destroying value for shareholders. 

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

How I’d apply the Warren Buffett method to buying shares

Learning from billionaire investor Warren Buffett, our writer explains his own approach to investing in shares for his portfolio.

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

This dividend share yields under 1% — but I’d still buy it

This dividend share has a low yield. So why would our writer consider adding it to his income portfolio?

Read more »

Young lady working from home office during coronavirus pandemic.
Investing Articles

Looking for a good share to buy? Here’s how I do it

Here are two approaches our writer uses when hunting for a good share to buy for his portfolio to aim…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

One cheap FTSE 100 share I’d buy for a new bull market

This FTSE 100 share is unloved and starting to look seriously cheap, says Roland Head.

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

How I’d invest £500 in UK shares in 2022

Investing a small amount of capital in UK shares can result in high commission costs. Zaven Boyrazian explains how to…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

2 battered FTSE dividend stocks to buy in July!

I'm still searching the FTSE 100 for the best bargains to buy. I think these two big dividend shares are…

Read more »

Woman pulling baffled face
Investing Articles

Can I trust Lloyds’ 6.1% dividend yield?

The Lloyds' share price has sunk in 2022, causing the bank's dividend yield to leap. But can I really trust…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

3 top stocks to buy before the market rebounds

Edward Sheldon highlights three beaten-up stocks he'd buy before global stock markets stage a recovery from their 2022 declines.

Read more »