Purplebricks sinks after brokers’ demolition job
IN Greek mythology, Icarus plummets to his death after flying too close to the sun while wearing wings made of wax and feathers.
According to the learned analysts at Berenberg, this is not unlike the fate that could befall online estate agent Purplebricks.
In a brutal note, which is indeed entitled The Icarus Of Solihull, the investment bank downgraded the West Midlands business from ‘buy’ to ‘sell’ and slashed its price target from 470p to 80p.
It warned of a slowdown in the Uk property market, as well as tough conditions in the US and Australia, and growing restrictions on estate agent fees.
Purplebricks should ditch its global expansion plans or raise more cash, Berenberg said.
It added: ‘Without a significant change in the current strategy, we expect losses and cash burn to accelerate this year and in 2020.’
The criticism sent Purplebricks’ shares spiralling down 6.1pc, or 8.4pc, to 129.6p, wiping £25.5m off the group’s value.
The business has faced several difficult months, and also saw its shares hammered in February when it cut annual sales guidance and announced the bosses in its Uk and US units were leaving.
The shares are down almost 60pc in the past year. Purplebricks has revised down its guidance for 2019 to between £130m and £140m, compared with its initial forecast range of £165m to £175m.
The business said the Australian housing market faces difficulties, while in the US it flagged a ‘slower thanexpected response’ to its marketing campaigns.
And on a bearish day for analysts, it was not the only company to get a kicking. Bus and rail operator Stagecoach was down 5.8pc, or 8.6p, to 138.9p after Jefferies cut its rating from ‘ hold’ to ‘underperform’ – despite a recent trading update that was well-received by investors.
Stagecoach said sales were up across most of its divisions in the second half of the financial year, pointing to strong performance from its rail arm.
But the Jefferies analysts said the rail business faces several risks over the future of franchising deals in the Uk.
They added the bus firm is a better bellwether for the company’s value, but even that was facing ‘cost-inflation headwinds and overcapacity’ in London.
Liberum downgraded the transport group’s rating as well, from ‘buy’ to ‘hold’.
However, the broker had more positive things to say about drugs group Astrazeneca after it announced a £2.7bn cash call last week. The deal was partly to fund a commercial tie-up with Japan’s Daiichi Sankyo, which has developed a potential breakthrough treatment for breast cancer.
Dubbing it a ‘heroic deal’, they said the DS-8201 cancer drug could eventually net Astrazeneca more than £2.3bn in annual sales if it proved successful.
The analysts said: ‘ We have looked at the sales potential of this drug. It should be a blockbuster.’
Meanwhile the FTSE 100 edged up amid news that the US and China, the world’s two largest economies, are tip-toeing closer to a trade deal. As the bell rung, the blue-chip index was up 0.6pc, or 44.93 points, at 7446.87.
Washington and Beijing have been at each other’s throats over tariffs and restrictions in China, which the US says are unfair. However housebuilders Berkeley Group and Barratt were down 1.7pc, or 66p, at 3777p, and 1.6pc, or 9.8p, at 616p respectively after figures showed Uk property prices had fallen.
BT fell 1.4pc, or 3.15p, to 223.85p as investors reacted to news that Ofcom is looking into a £50m deal last year which saw the telecoms group win a contract to provide services to public bodies across Northern Ireland.