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Trainline to face unavoidable earnings cuts, says JP Morgan

Published: 10:51 26 Jan 2021 GMT

Trainline - Trainline to face unavoidable earnings cuts, says JP Morgan

Trainline PLC (LON:TRN) is facing “unavoidable earnings cuts” as ongoing lockdown measures cause a continued weakness in passengers on the UK’s railways, according to analysts at JP Morgan, who downgraded the stock to ‘neutral’ from ‘overweight’ in a note on Tuesday.

The investment bank, which also cut its target price for the FTSE 250 ticketing platform to 382p from 486p, said the shares had been “volatile in the past few months” as lockdown restrictions continued, and as a result, they saw “limited catalysts” for the shares going forward.

READ: Trainline confident of riding out extended lockdown as losses continue

“We are factoring in the unavoidable earnings cuts (our 2021/2022 EBITDA estimates change from £-25m/£52m to £-38m/£25m) and we expect consensus expectations to follow in the next few days. While we highlighted that an ongoing shift towards the concession model in the UK rail industry is unlikely to meaningfully change Trainline’s offering and business model, we expect ongoing negative sentiment to impact the shares”, JP Morgan said.

Analysts also noted that UK train passenger numbers “are still tracking well below previous year’s levels”, and that while a decline in short-term numbers is largely anticipated they were also “getting more cautious on the speed of recovery going into 2022”.

“Risk/reward has turned post the recent outperformance, and, with limited upside potential…we downgrade the shares to Neutral”, the bank concluded.

Trainline shares slumped 5.9% to 381.2p in mid-morning trading.

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