Berenberg raises target price on National Express

Following the extension of government lockdowns into the early part of 2021, Berenberg reduced its earnings estimates for National Express in 2021. However, the analysts stated that crucially, its 2022 forecasts remained "largely unchanged".

Berenberg, which reiterated its 'buy' rating on the stock, stated National Express was "far more resilient" than many other travel firm's, with just over 50% of revenues generated from very fragment contracts with high levels of visibility, and thinks the company will experience "one of the fastest bounce backs in the travel sector" given its high exposure to domestic travel.

"Just over half of the company's revenues are contracted, meaning that it does not take passenger revenue risk," said Berenberg, which thinks the fact that National Express remained EBITDA-positive even in the second quarter of 2020 was a testament to its diversified business.

The German bank added that while the short-term focus was understandably on the recovery curve, it believes National Express still has a number of "attractive opportunities" to continue growing its business over the medium term, including growing its North America school bus operations, winning further urban bus contracts in Morocco and achieving its ambition to double revenues in its North American shuttle services unit.