On Friday, UBS issued a revised rating for Trainline Plc (LON:TRNT) (TRN:LN) (OTC: TNLIY), moving the stock from "Buy" to "Neutral," while slightly increasing the price target to GBP3.50 from the previous GBP3.25. The adjustment reflects a change in growth expectations for the company, with significant growth now anticipated to occur later than initially predicted.
The UBS analyst noted that while Trainline's long-term growth prospects, particularly in international markets, are promising, there are immediate challenges that may delay these opportunities. The railway operators, especially in France, are facing difficulties launching services, which is expected to push back the timeline for growth.
Trainline's UK market appears to have fully recovered, which suggests that the pace of future growth may decelerate. UBS has adjusted its near-term estimates for Trainline to account for the anticipated slower growth due to competition among rail carriers.
Despite the near-term slowdown, UBS has marginally increased its long-term estimates for Trainline. This revision is based on two main factors: the reduced risk in the UK market following the government's decision to drop its own ticketing platform, and an increased total addressable market (TAM) for international operations. This optimism is fueled by the rapid growth of rail competition in Spain and reports of intensifying competition on international routes.
The reevaluation by UBS to a "Neutral" stance indicates a more cautious outlook on Trainline's stock in the immediate future, balanced by a recognition of the company's potential in the longer term. The new price target of GBP3.50 reflects these updated expectations for Trainline's performance in the coming years.
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