Trainline Shares ‘Now Heavily Discounted’

Trainline (LON: TRN) shares have taken a significant hit this year, plunging over 36% year-to-date, with a 13% drop last Thursday as concerns over slowing ticket sales growth and the potential impact of a state-backed ticketing platform worried investors.

However, Barclays analysts believe the sell-off may have been overdone, arguing that Trainline's current valuation appears “heavily discounted.”

In a note issued last week, Barclays maintained an Equal Weight rating on Trainline, with a price target of 325p. 

The bank’s analysts acknowledged that trading had been “a bit soft” and that the UK government’s Great British Rail (GBR) Retail platform posed a long-term risk, but they also noted that the market reaction was “harsh” given the company's track record.

Trainline has consistently delivered earnings-per-share (EPS) growth and rising net ticket sales (NTS), Barclays stated, but the lack of a consensus earnings upgrade after its latest results contributed to the recent negative sentiment. 

Still, the analysts believe that the stock’s current multiple is already pricing in a fairly bearish scenario regarding GBR Retail’s potential impact.

While maintaining a neutral stance, Barclays suggested that a short-term rebound could be possible. “We are EW [Equal Weight] though a short-term catch-up could be merited,” the bank concluded.

So far on Monday, Trainline shares are up around 1.5% at 269.4p a share.