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Purplebricks - a couple of charts: what do the analysts fear is happening?

By Tom Winnifrith | Monday 11 September 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Nomates Woodford trainwreck in waiting Purplebricks (PURP) has not officially warned the market that it will not meet forecasts. However have a butchers at these two charts from Bloomberg...

The message is clear: analysts are steadily reducing their expectations. There is a very clear trend and I expect it to accelerate. That is partly because the housing market is slowing and that will hit this company harder than traditional Estate Agents. And partly because - as per the Watchdog expose - I think that there is a fundamental flaw in the business model. And partly because there is no barrier to entry other than capital and I see a new, even lower cost, player, part of the "Easy" stable, is now advertising on the telly. That will sap margins, force up marketing costs and surely eat into volumes.

Why does this matter? Because Purplebricks is priced to perfection as a growth stock. But growth stocks do not see forecasts slashed. That is why this is Nomates Woodford's next disaster in waiting. It is a when not an if.

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