Purplebricks shares tumble as Berenberg gets knives out

Shares in Purplebricks nosedived on Friday after analysts downgraded the online estate agent and said it would have to raise fresh cash.

Berenberg warned in a research note that the group should either give up on its international expansion plans or raise more funding as it slashed its rating from buy to sell.

It cited a slowdown in Purplebricks’ core UK market, as well as tough conditions in Australia and the US.

“Without a significant change in the current strategy, we expect losses and cash burn to accelerate this year and in 2020, when we believe the group will face the choice of either raising fresh equity, or debt, or retrenching to the UK,” the investment bank said.

It also lowered its target price for shares to 80p from 470p.

Shares were down more than 7% at 127p.

It caps a difficult few months for Purplebricks, which saw its stock hammered in February after it cut annual revenue guidance and announced the departure of the bosses of its UK and US units.

The company revised down its guidance for the 2019 financial year to between £130 million and £140 million, compared with its initial forecast range of £165 million to £175 million, citing challenges in the US and Australia businesses.

Purplebricks said there are a number of headwinds in the Australian housing market, while in the US the company flagged a “slower-than-expected response” to its marketing initiative.