Canaccord lifts Trainline target price, talks down nationalisation concerns

Canaccord Genuity has hiked its target price for booking platform Trainline from 428p to 455p and kept a 'buy' rating, quashing concerns around rail nationalisation speculation that has been weighing on the shares for some time.

"Trainline has seen its share price fall after the proposed Labour changes to the UK rail. Yet, in our view, the changes proposed by Labour help place Trainline as a key component within their new UK rail vision and should help remove uncertainty overhanging the stock," said Canaccord analyst Karl Burns.

He said that the visibility provided by Labour shows that third-party players like Trainline are "crucial" to the party's plans for the UK rail model.

"Labour will have to unpick over 30 years of privatisation and this will involve significant infrastructure, legal and technology changes that are likely to take 4-5 years, and with retailing websites and apps likely to be less of a focus initially, this should help underpin the Trainline business model, further strengthening its position and relationship with Labour in the UK," the analyst said.

Meanwhile, increasing digitalisation should be positive for the company, given its already 60% share of the online market and 16m monthly active users.

On Canaccord's estimates, Trainline's stock trades at an enterprise value-to-EBITDA ratio of just 10.6 – something that Burns believes it too low. "Trainline is a high-growth, high-margin, cash-generative platform business but is not currently valued as such [...] We think the current valuation significantly understates the growth and margin potential," he said.

The stock was up 3.8% at 313.9p by 1026 BST.