UBS upgrades Purplebricks, says market share losses priced in

UBS upgraded its stance on shares of Purplebricks on Friday to ‘neutral’ from ‘sell’ as it said market share losses are now priced in.

The bank, which cut its price target to 64p from 78p, noted that Purplebricks shares are down around 40% year-to-date.

"Shares are now trading at 12x our revised FY23E EBITDA, or a 4% FY23E estimated free cash flow yield," it said.

"At this valuation, we believe risk/reward is balanced."

UBS said upside exists if Purplebricks can deliver its management targets to gain a 10% market share.

"While Purplebricks has been losing share of instructions in recent years, the company is changing its operating model and value proposition in an attempt to reverse this trend," it noted.

UBS said downside exists if the company’s market share does not improve in the next 12 months.

The bank noted that Purplebricks will report H1'22 results in December 2021. It expects the company to report a significant year-on-year decline in instructions, driven by a tough comp, weak market share trends, and a lack of new instructions in the market overall.

However, it said the group may also be able to show evidence that its new Money Back Guarantee proposition is gaining traction in the market.