Investors have been urged to buy shares in Purplebricks.
In his Inside the City column, Sunday Times writer Danny Fortson tipped the stock ahead of Purplebricks’ results this Thursday.
He said the firm is expected to report a loss on £18m turnover.
Purplebricks, notes Fortson, has bucked the trend where shares in Foxtons, Savills and Countrywide have all dipped by about 15% over the last year.
In contrast, Purplebricks is now valued at £336m.
“The question is whether Purplebricks can keep thriving while its rivals stagger.
“I think it can. The company reminds me of Uber. No, I’m not saying Purplebricks will be a $60bn global phenomenon – simmer down.
“But what it has done, like Uber, is zero in on an industry notorious for being expensive, inconvenient and leaving one feeling you need a shower after using its service.
“It’s not rocket science. Purplebricks values, lists and sells homes for a fraction of the price and without having to endure a slick-talking estate agent.
“Since starting from zero two years ago, the company is taking 3,000 listings a month.
“It is one of the top four agents, by volume, in Britain.
“For the likes of Anthony Gutman, Goldman Sachs banker and adviser to Sir Philip Green, and fund star Neil Woodford, it has been a stonking success. With the company now worth £336m, his 29% holding is £97m.”
Clearly, says Fortson, the stock has got ahead of itself.
“Based on its projected £4.5m profit in 2017, it is trading at 44 times future earnings.
“Countrywide, which turned an £86m profit last year, is trading at about nine times.
“Purplebricks will no doubt hit some bumps in the road. It needs to get better at converting listings to actual sales. The housing market is slowing.
“This will be a wild ride, but long term I think the destination will be rather cosy. Buy.”
Comments (32)
The question here is this, will the consumer continue to consider the ‘disruptor’ model of paying a lower amount without any guarantee of a sale, or pay a higher sum for absolute certainty when their house has been sold. In many cases if the difference of that sum ( fees ) is over 2k then some will ‘take the chance’ of a PB model. In my view ( agent for 27 years in south east ) agents should consider having their own offering of a PB type service to capture this small missing market that is expected to grow to 25% in the next 5 years. If PB are listing between 2-3k a month, that is homeowners choosing this model. Agents with this string in their bow, can cover any local resident thinking about choosing the ‘cheaper’ option. Just my thoughts
Great post!
Purplebricks properties for sale or SSTC on Rightmove:
Upto £650,000 – 1,351
£650,001 plus – 86
Comparing PB to Uber doesn’t really stack up, as you’re not comparing apples with apples. Uber, without doubt, is excellent and I can happily use my app to find and book a taxi that I know will get me from A to B cheaper than the traditional models. In this example, the consumer is buying a product (a ride from A to B)
However, when selling a property it’s completely wrong to assume your destination is fixed, irrespective of which agent you choose. Property simply doesn’t have a recommended retail price. It has a value which isn’t pin point, it is a range. Whether you end up at the lower end of the range or the higher end, very often comes down to how good your agent is. That isn’t only the case in terms of asking price achieved, but also whether or not the whole thing makes it over the finishing line. In this example, the consumer is buying a service, and ultimately the quality of service will shape their outcome.
I wonder how successful Uber would be if their model was to offer cheap fares, but there was no guarantee that the car would go anywhere once you got in it. Furthermore, let’s assume that the car did actually start it’s journey, but it wasn’t until you got out that you realised that you had only achieved 95% of the distance you’d hoped to go. Imagine also, if you will, that just as you were about to get out of the car, the driver stuck it into reverse and took you all the way back to where you started from, but still expected you to pay their fare.
Looking at it this way, I’m sure Uber would have been a complete flop!
Friend has used PB, apparently paid on completion not upfront….house valued at £390k (other agents valued similar), house sold for £385k after two viewings (which PB did)….including conveyancing she paid about £2300. Her chain was somewhat easier as she was moving into rented and the purchasers were buy to let with an agreed mortgage.
Would I used PB? Yes, because i know how much my house is worth and if I was a willing seller, then to me its a non brainer. I work in lettings, so dont see the PB model working as well in that sector.
I’m sorry, but you really don’t know what your house is worth. I’ve currently got a property in my pipeline that was on for £700k. We ended up generating 5 offers and through strong negotiation on our part, coupled with the fact that we’d created strong competition, we ended up agreeing a price of £770k. If the same property had been on with the likes of PB, and the first viewer had offered £700k, the sale would have been tied up and the vendor would be telling all her friends down the NCT group how wonderful they are.
Little would she had known that £70k had been left on the table. Still, on the plus side, she would have saved the best part of £11k in fees. Classic case of focussing on cost, not value.
You have to remember that the agent doesn’t set the value, nor the vendor. The market does. Therefore, the agent’s primary function is to create the market and some agents are far better at this than others. Agent’s don’t sell houses, they sell viewings. The portals bring the buyers, good agents turn them into multiple viewings.
well if I don know the value of my own home, then I am pretty sure you will not.
you are right the market sets the price but surely that is where knowing completion price of houses in the same road have achieved…
I am not in the same bracket as £770k but I can assure you my house is not worth more than £230k….you can try and pretend using an agent at 1% will get me a better price but that does not work for me ……I would rather pay PB than use a high street agent
I appreciate getting the deal to completion is the hardest part of an agents life, but if you have two parties with very little baggage, then using PB is a no brainer
You make fair points Ding Dong. However in your last sentence you say ‘…if you have two parties with very little baggage, then using PB is a no brainer’.
The hugely significant word is ‘IF’
A vendor cannot possibly know what position the buyer will be in until they are found (and sometimes you can’t be sure after that either!).
Appreciate the sentiment AI…Yes I appreciate it is a big IF, but my experience in London was a number of the purchasers were cash buyers or those with very low mortgage requirements….
My post was to add some reality to the situation of a post which was mainly anti PB. As I said, I have no personal experience of PB, only that a colleague used them to sell her house and she sold it quickly and at about a third of the cost of High Street agent…I completely understand that she MAY have sold at a higher price using an agent (debatable either way) but she had a price in her head and she achieved that price.
As I said, my house is relatively cheap in comparison but I would have no hesitation in using PB or whatever online model was available at the time, if the commission/up front fee stacked in my favour. I absolutely understand that there will be occasions when a real agent is required but that type of clients has begun to diminish.
That is reality sadly for the High Street Agent. As for the lettings side, which I work in, I dont see PB having the same effect (if any)
This bloke, Danny Fortson, says buy PB shares.
It’s in the same way as you would have bought as much land as you could around Chelsea back in the Jurassic era.
Now you just got to live long enough to profit from the enterprise and not go bust waiting.
Do you see my point Mr Fortson ?
I have some magic beans for sale at a reasonable price, if anyone is interested?
I might float them on the AIM later….
I have a cow I’m supposed to be taking to market, fancy a part x? I’m uncertain about the milk quota and single farm payment scheme. You could do well if we stay in!
Purplebricks’ success lies simply in its ‘first mover’ status as a company that offers an alternative business model to the existing one. Whenever there is an industry that organizes itself in a way that seems to overcharge for it’s services – be it hotels, taxis, insurance or property (where the fees rise in line with the housing market), the newcomer will get plenty of attention, which translates into value, particularly if it is seen to be the leading player.
The best way to deal with this is to create a better competitor. In a market where the average sale takes months instead of weeks it might best to look at the way that conveyancing services are charged. Online conveyancing fees are so low that many solicitors end up offering a poor service as they cannot afford to open the file. As a consequence the transaction often moves at the speed of the slowest conveyancer in the chain and this reflects badly on the agents involved, even those with excellent sales progression.
The estate agent that works for a fixed fee that includes marketing, sales and customer hand-holding through to completion will win this battle. Getting upset about a disrupting influencer like Purplebricks is a natural reaction of an industry getting ready to change.
Ha ha ha ha ha ha ha ha ha ha ha ha ha ha.
Hmm 3000 listings a month don’t think so according to Rightmove !!
How many is it? I’ve tried to count them up but failed
Extrapolating the figures they published in two seperate articles on Eye (estimate) 2318 average per month which leaves them about 29.4% short of the 3000 listing per month they said in an article they were “approaching”; the figure necessary to break even.
If Pruplebrick’s turnover is *** and the number of properties listed is 3000 per month it means they earn less per listing than they claim. If they earn more per property than they claim and they are listing 3000 properties per month then the revenue would be correspondingly higher.
Mathematically they simply can’t switch the numbers claimed in individual stories and not expect someone to piece them together.
that *** is nothing mucky, it is 3 Xs
Failing that you can buy a 1% profit share in my company for £100,000 Makes about as much sense!
Danny Fortson: Is he the same bloke who predicted price of a barrel of oil reaching $250 in the foreseeable future?
http://www.independent.co.uk/author/by-danny-fortson
Just asking folks.
Sorry he didn’t predict it just wrote an article in 2008 about how petrol would be £2 per litre and barrels of oil at $250 but he got it a little wrong.
A game of smoke and mirrors. Watch this space
Danny Forston probably needs to sell his own shares and is trying to bump the price up.
“The question is whether Purplebricks can keep thriving” on what planet or drug induced state is “the firm is expected to report a loss on £18m turnover” considered thriving?
I reckon this is a put up job, a vexatious story simply designed to counter the Jeffries story from last week. A journalist **** a hoop and man moist over a firm that’s losing money despite claiming the 4th biggest register in the industry? Funny!
What Danny Fortson has failed to do and the bit that makes this appear as simply an embarrassing regurgitation of a story spoon fed to him is any maths. The lack of any attention to detail, the slightest bit of curiosity or any checking up whatsoever robs the story and author of any credibility and respect.
Never mind it’ll be good for comments!
**** = large male chicken,
‘large’?! That’s rather Freudian.
I was always told it’s not about the size; it’s what you do with your male chicken that counts 🙂
As Mandy would say “you are awful … but I like you!” ( I can’t say **** Emery, that would get censored too)
Sell sell sell these shares will be worthless
OR Buy, Buy, Buy if you are a complete idiot !
‘an industry notorious for being expensive, inconvenient and leaving one feeling you need a shower after using its service.’ …’ ‘without having to endure a slick-talking estate agent.’
Lazy, rude, stereotyping. And ignorant, since he clearly doesn’t realise that the PB so-called ‘local experts’ are mainly ‘slick talking estate agents’.
As for PB being ‘worth £336m’ – It’s only worth £336m to those who think the company will succeed. But as mainstream agents begin to offer customers an option to use a no-frills low-cost service, the PB rise will be halted and then reversed. Not so long from now those shares will be worth squat.
“But what it has done, like Uber, is zero in on an industry notorious for being expensive, inconvenient and leaving one feeling you need a shower after using its service.
Arrogant rude misinformed . Has “anyone” even heard of him ?
The “stonking success” he talks about it being for its key investors is a joke. Hasn’t made a profit,not likely to any time soon. So it’s trading at 44 times its future earnings. Well as it it hasn’t had any yet surely that figure should be a negative ! Why would you buy such a massive risk stock. Beyond me .
Only sensible thing he said is that PB needs to start converting listings to sales.Think of the thousands of disappointed mis advised clients they have “listed” who remain unsold, until the cavalry ( proper estate agents) come to the rescue. And think of the others who have been undervalued and sold cheap, because their “local experts” who cover vast swathes of the country, hadn’t a clue on real values.
It also needs to stop spending millions on advertising if it has any chance of making a profit
Worrying stuff that the city know nothing and obviously gamble.
Maybe in a few generations purplebricks model may work.
Unfortunatly the internet generation will have no money to buy a house because by then every business will be on the internet, charge nothing because making a profit is a sin, and they will be slaves who earn nothing…. great fun.
govt. needs to start taxing web businesses to level the playing field.
how can a business offering no service be good for the consumer??