Can Purplebricks rescue the share price and turn itself around?

Failed ventures overseas, a weakening UK housing market and a dire technical outlook do not bode well for Purplebricks and its shares.

Purplebricks Source: Bloomberg

Purplebricks abandons US and Australia 

It has been a tough year for Purplebricks. The firm has faced serious obstacles in its quest to expand overseas, and is encountering challenges in its home market in the UK as well. 

The firm has already withdrawn from Australia, and will now abandon its attempt to break into the US. Operations in Canada will remain unaffected, but the US division had required too much effort and financial investment to become viable. 

The UK arm continues to see revenue growth at 21%, and the firm overall saw 55% revenue growth to £136 million for the full year, but unfortunately pre-tax losses rose to £56 million, nearly double the previous year. The firm plans to plough more of its £62 million net cash into marketing and technology, in order to further its lead over competitors.

Housing downturn threatens to get worse 

In Australia, the firm was hit hard by a downturn in house prices. Revenue per instruction fell between 2018 and 2019, but the cost per instruction rose. If a similar event were to happen in the UK, then it would spell significant trouble for the firm. Even its cash position is much worse; a year ago it had £153 million to spend. Now that is down to £62 million, and will fall further once it has finished closing its US and Australian operations. 

Much of the firm’s success was down to rapid expansion. But the push overseas came too early, when the UK operation had yet to mature. Now Purplebricks is being forced back on its original division, at a time when the economic outlook appears to be darkening.

Purplebricks share price – technical analysis 

The decline of Purplebricks’ share price has been as swift and impressive as its ascent. Since peaking in August 2017, the share price has gone from £5 to, briefly, below 100p. Since mid-2018, the share price has carved out a string of lower highs and lower lows. The 50-day, 100-day and 200-day moving averages are all continuing to decline, and overbought readings in the stochastic indicator have proven to be excellent indications of potential selling opportunities. 

Since the beginning of May the price has found a floor above 90p, but rallies to 110p have run out of steam. A break above 110p would provide a more bullish view in the short-term, and then above 120p the price will have broken trendline resistance from the May 2018 high. Below 90p the 72p area is the next downside target, being the low from January 2016.

Purplebricks chart Source: ProRealTime

Purplebricks chart Source: ProRealTime


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Bid
Offer
Updated
Change
Bid
Offer
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Sunday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.


For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.