According to the investment bankers at JPMorgan Cazenove, after reducing the rating for Rightmove from "neutral" to "underweight," reduced its target price for the stock. This means that the future of Purplebricks is shaping up while Rightmove might be in trouble.
In contrast, the bank gave Purplebricks an “overweight” rating and a price target of 733p – an impressive increase of 71% from its share price of 428p on Tuesday.
JPM said Purplebricks’ financials are impressive. It estimates that its market share in the UK is currently around 6% and is set to increase to at least 15% by 2022.
Purplebricks is also looking to export its model to Australia and the US.
“Marketing spend/launch costs are holding back profitability, but we expect the company to be profitable next year and to generate earnings before interest, tax, depreciation, and amortization of £190 million by 2022,” JPM said.
In contrast, the bank warned that a rising share of online agents will accelerate pressure on commission rates for traditional agents, amplifying tough market conditions post-Brexit. In this environment, the future for Rightmove looks challenging.
“We believe the property agent market faces significant changes over the next few years with the rise of new disrupters in the form of online agents,” JPM said.
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