Purplebricks Share Price Forecast November 2021 – Time to Buy PURP?

Shares of online real estate agent Purplebricks (LSE: PURP) are in the green today, currently trading at 33.40p at the time of writing. Its share price plummeted by almost 40% yesterday after its management has issued an ill-received trading statement. This has led to a sharp decline, which has pushed the company’s 12-month return to -45%. Many investors are wondering whether this is a buying opportunity for Purplebricks shares.

Purplebricks – Technical Analysis

According to the financial statement, the market cap of the company is at £101.246 million with total assets worth £116.8 million. Revenue for 2020 was at £90.90 million with a profit margin of 4.95% compared to £80.50 million in 2019.

Oscillators are mixed such as Relative Strength Index (14)(16.94) and Commodity Channel Index (20)(−301.84) are indicating a buy action while Stochastic %K (14, 3, 3)(6.90) and Average Directional Index (14)(33.57) are neutral. Moving Averages such as Exponential Moving Average (10)(47.43), Simple Moving Average (10)(49.56), Exponential Moving Average (20)(51.75), Simple Moving Average (20)(53.70) and Exponential Moving Average (30)(54.05) are indicating a sell action.

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Recent Developments

As mentioned above, PURP shares crashed the morning the company released its half-year trading update. It had previously enjoyed the boom in the UK property market which was bolstered by the UK government’s stamp duty holiday. However, the six-month trading period to October has been a challenge for Purplebricks, as the number of properties brought to the market was 23% less than the equivalent period last year.

Things get more complicated when we consider that the company has been trying to make adjustments to its business model. Moves such as bringing staff in-house and introducing a new pricing system have been encouraging but aren’t apparent in performance just yet. Purplebricks has also been suffering from the supply problem created by the lifting of stamp duty tax by the government. The property sector’s growth could slow down as stamp duties come back into play and interest rates increase. Management expects only 22000 properties to be moved by the business compared to 35387 a year ago.

The company is now predicting that underlying earnings will be below initially issued targets for the year. There is little the company can do as the catalyst behind this market slowdown is ultimately out of its control. CEO Vic Darvey admitted that the company underperformed due to short-term operational disruption.

Should You Buy PURP Shares today?

While the slowing level of growth can be frustrating for investors, they still have enough reasons to be optimistic for the long term. It recently completed an operational overhaul aimed at vertical integration. Other changes made include introducing a new simplified pricing structure as well as a new sales team in-house. However, the company expects the future trading environment to remain tough, which would be the case if the selling pressure continued for Purplebricks.

While it’s too early to judge how successful these decisions will be, there are high chances that the company will have an increased level of control over sales. Margins might also improve which means good news for the PURP share price. The company’s market cap now stands close to £160 million after yesterday’s decline, which brings it close to its lowest point over the prior 52 weeks. The market has probably overreacted to the news resulting in the shares being undervalued currently. But considering that the problems faced by the company are way beyond the management’s control, it doesn’t good look for Purplebricks at the moment. Therefore, now is not the time to add PURP shares to your portfolio.

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