Trainline slumps on JPMorgan downgrade

Trainline shares slumped on Tuesday after JPMorgan Cazenove downgraded the stock to ‘neutral’ from ‘overweight’ and cut the price target to 382p from 486p as it pointed to the fact train usage remains weak due to Covid restrictions.

JPM noted Trainline shares have been volatile in the past few months, reflecting a continuation of lockdown measures across its key markets and a constantly changing outlook for train passenger levels.

According to its data, UK train passenger numbers are still tracking well below previous year’s levels, at 27% in December and 14% in January so far. "While we would argue cuts to short term numbers are anticipated, we are also getting more cautious on the speed of recovery going into 2022E," JPM said.

The bank upgraded the shares in early November but from here it sees a lack of catalysts to deter further outperformance.

JPM factored in its "unavoidable" earnings cuts - the bank’s 2021/2022 EBITDA estimates have been downgraded to £-25m/£52m to £-38m/£25m - and said it expects 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," it said.

Risk/reward has turned following the recent outperformance, JPM, said, and there is now limited upside potential to its new price target.

At 0940 GMT, the shares were down 6.8% at 77.40p.