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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

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.

Should you invest £1,000 in Purplebricks Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Purplebricks Group Plc made the list?

See the 6 stocks

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. 

Should you invest £1,000 in Purplebricks Group Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Purplebricks Group Plc made the list?

See the 6 stocks

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 assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Long-term vs short-term investing concept on a staircase
Investing Articles

Down 37% from May, does Glencore’s near-£3 share price look cheap to me?

Glencore’s share price has tumbled from its one-year traded high, which suggests there may be good value in it. I…

Read more »

Dividend Shares

How much would an investor need in dividend shares to make £1,000 a month?

Jon Smith talks through both the strategy and the numbers behind the investment aim of using dividend shares to make…

Read more »

A row of satellite radars
Investing Articles

Defence spending is on the rise and this UK growth stock could be set to cash in

With the UK ready to increase its defence spending, Stephen Wright thinks the stock likely to benefit the most isn’t…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£11,000 in savings? Here’s how investors could use that to target an annual passive income of £12,892 over time!

Money put into high-dividend-paying shares with the returns used to buy more of them can generate potentially life-changing passive income.

Read more »

Investing Articles

Down 10% and 15% in a month! 2 cheap shares investors might consider buying with £2k today

It's always a good time to buy cheap shares! Harvey Jones picks out two FTSE 100 companies that have fallen…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Here’s how £350 a month could put a stock market beginner on the road to wealth!

Interested in getting a foot on the stock market ladder? Our writer breaks down the facts and figures so aspiring…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

The 5 most popular FTSE 100 shares on the AJ Bell trading platform

Our writer’s been looking at the FTSE 100’s most bought stocks on one particular investment platform. And he’s heartened by…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

Why isn’t everyone aiming for £37m in stocks and shares?

It’s never too early to start investing in stocks and shares through a SIPP or ISA. Dr James Fox explains…

Read more »