A shares analyst has predicted that Purplebricks could issue a profits warning before Christmas.
G A Chester, writing on investment website Motley Fool, said that Brexit could be damaging for Purplebricks which is high on his list of “stocks to avoid”.
Chester said that Purplebricks lowered its full-year revenue guidance late last year from between £165m and £185m to between £165m and £175m, and then slashed it to £130m to £140m two months later: “So it’s got form for missing expectations.”
Chester said that Purplebricks is now active in the UK and Canada after exiting the US and Australian markets.
In the second half of its last financial year, Purplebricks reported UK revenue of £41.8, down over 13% from the first half.
Its Canadian business posted revenue of £14.5m, which Chester estimates as zero growth.
Together, on an annualised basis, he estimates revenue at £112.6m.
Chester says the current City consensus is that Purplebricks will post revenue of £124.8m.
However, Chester thinks that Purplebricks will struggle to meet this expectation.
He also points to Purplebricks saying in July that current economic and political uncertainty is resulting in challenging market conditions “with volumes continuing to trend downwards”.
This month Rightmove reported that the number of new sellers coming to market is 13.5% down on this time a year ago.
“In these conditions, I really can’t see Purplebricks doing the double-digit growth on last year’s UK/Canada H2 revenue run-rate that it needs to meet market expectations,” says Chester.
The other company he expects to issue a profits warning this side of Christmas is clothing retailer Ted Baker.
UK listed companies issued more profit warnings in the first nine months of 2019 than in any year since 2008. Over one fifth of the profits warnings in quarter three blamed Brexit.
Yesterday, Purplebricks shares closed nearly 2% up at about 115p. A year ago they were 207p.