One or the UK’s most respected share tipping and investor websites has given Purplebricks a significant thumbs-down in a damming blog written by one of its experts.
The Motley Fool has advised investors to ‘dump’ shares in Purplebricks after concluding that the long-running period of rising share values in the company might “finally have come to an end,” he says.
Purplebricks shares have been sliding since early August, when they hit their all-time peak this year at £5.08p each, after which they have dropped to £3.64p, a reduction of 28%.
The website says that, because the company has yet to clear a profit and trades on a price-to-sales ratio of 21, the valuation of its shares are “still sky high” and that it is not confident that the Purplebricks business model is a good one.
“Essentially, it is a website and the company cannot patent its processes. Its only discernible advantages are its size and first-mover status and I’m not all that sure they are sustainable,” says The Motley Fool’s Zach Coffell (pictured, left).
He also thinks rival hybrid agents including Countrywide’s recent foray into online offerings will make it more difficult to turn a profit in the near future, and says he is “uneasy” that Purplebricks does not publish its sales completion figures.
Zach also questions why so many Purplebricks customers leave so many often positive views on the company’s much-trumpeted Trust Pilot account.
“Maybe I’m overreacting to speculation here, but these concerns, combined with the excessive valuations firmly put me off Purplebricks,” he concludes.