Trainline in ‘strong position’ as shares speed higher

The brakes were released on Trainline (LSE:TRN) shares today as investors cheered a strong trading update and a buyback plan equivalent to 14% of the technology stock’s market value.

FTSE 250-listed Trainline started today’s session at 260p, having reversed from December 2024’s three-year high of 435p to trade in a narrow range over the past four months.

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Headwinds for the ticketing platform have included Transport for London’s expansion of its contactless travel zone, Google changes to its search engine results and a previously announced reduction in UK commission payments from April.

The impact of economic and tariffs uncertainty on European growth and concerns over UK government plans for a single public sector retail website and app have also weighed.

Peel Hunt said today’s update, which included net ticket sales and revenues in the top half of full-year growth ranges, did not justify the current rating of six times forecast earnings.

It said a new £150 million share buyback to be executed over the next 12 months represented an additional 14% of current market capitalisation, having repurchased 13% since 2023.

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The bank added: “Given recent share price weakness, upgraded guidance and the new buyback, we reiterate our 460p target price and Buy rating.”

Panmure Liberum said: “Near-term, the current valuation is driven more by fears over regulatory risk than by short-term fundamentals – we continue to think Trainline is in a strong position and maintain our Buy rating and 470p target price.”

The City firm said the buyback and the 55% growth of Trainline’s international business-to-business operation were the two highlights of the update.

Factoring in the cancellation of shares through the buyback programme, Panmure Liberum increased its earnings per share forecasts by between 6% and 8% over the next three years.

Trainline bolstered the City’s expectations in today’s update by forecasting annual adjusted earnings growth at the top end of its previous guidance range of between 6% and 9%.

This followed UK consumer net ticket sales 8% higher at £2.1 billion in the six months to 31 August, reflecting continued strength in leisure travel sales, a commuter market recovery and the lapping of strike action in the prior year.

April’s reduction in the headline commission rate from 5% to 4.5% meant UK consumer revenues were flat year-on-year at £107 million.

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Net ticket sales in Europe of £594 million were 2% higher as Trainline actively focused its marketing on European high-speed routes with emerging carrier competition.

The investment included the French Southeast network, where Trainline’s sales rose 34% in the second quarter after Trenitalia expanded its services in the region.

Chief executive Jody Ford said: “Rail liberalisation in Europe continues to demonstrate the value Trainline brings as the preeminent domestic aggregator.”

International consumer revenues were 2% higher at £34 million, despite foreign travel sales being impacted by changes to Google’s search results page and weaker US tourist demand.

Half-year results are due on 5 November, with growth in group-wide earnings seen above the top end of Trainline’s full-year guidance range between 6% and 9%. The company said this reflected the benefit of operating leverage and cost optimisation efforts.

UBS, which has a price target of 465p, added: “The ongoing strength in the UK market, evidence the group can capitalise on carrier competition when it launches in Europe, and the larger buyback than we believe was expected by the market should be positively received.”