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Trainline (LSE:TRN) has been a trainwreck in the FTSE 250 in recent times. Since the start of 2025, this tech stock has been cut in half, including a 19% drop since last week.
However, one City broker (Shore Capital) reckons the selling has gone way too far. According to its valuation model, Trainline should be trading at 400p by this time next year. Were this to happen, it would be a more-than-doubling from today’s 196p.
So, should Trainline be on bargain-hunters’ radars? Here are my thoughts.
Why has the stock come off the tracks?
In an alternative scenario, I can imagine this stock thriving. That’s because Trainline is the number one dedicated travel app in the UK, with 18m customers. It’s also Europe’s most downloaded rail app.
Revenue has surged from £67m in FY21 to £453m last year (FY26). And due to its capital-light platform model, the company is solidly profitable these days.
Add in a thriving, higher-margin business-to-business (B2B) offering, and Trainline has all the ingredients to be a winning stock. In theory, that is.
In the real world though, the investment has been derailed by the creation of Great British Railways (GBR). Specifically, the government’s plan to consolidate the fragmented ticketing systems of private train operators into a single public booking platform.
Because of this, investors are worried about competition and the sustainability of Trainline’s booking fees. Might we see a gradual drop-off in booking volumes and margin pressure from lower fees? It’s possible.
Finally, proving that it never rains but it pours, the Competition and Markets Authority (CMA) recently announced an investigation into Trainline over how it presents fees to consumers. The firm said it’s working with the CMA “to ensure our customer experience remains both transparent and compliant“.
Worst-case scenario
However, Shore Capital’s analysis suggests that the market is now pricing in a worst-case scenario that’s unlikely to happen.
And looking at the valuation, the stock is dirt-cheap after this latest sell-off, trading at just 7.8 times forward earnings and less than five times adjusted EBITDA!
Trainline has a growing European business (17% of net ticket sales) and its B2B Solutions operation, which generates over 40% of group revenue and more than 50% of earnings. So the firm’s operations are more diversified than it might first appear.
All aboard?
Will Trainline retain customer loyalty despite charging booking fees? Well, I think most customers assume there’s a fee — why else would Trainline exist? — but continue to value the convenience and familiarity of the app.
Old habits die hard, as they say.
Having said that, I feel the company does face serious competition from Uber. I haven’t used the Trainline app for a long time, having switched to its larger US rival and its Uber One paid subscription service.
Even so, the stock looks too cheap, in my opinion. Since September 2023, Trainline has repurchased 23% of its shares, and continues to buy back more. This has helped earnings per share (EPS) more than quadruple over the past three years.
Despite the regulatory risks, I think this stock deserves attention from bargain-hunters. City analysts seem to agree, with their average target sitting 78% above the current share price.
Who knows? We might be looking at a FTSE 250 bargain hiding in plain sight.
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Ben McPoland owns shares in Uber.
This story originally appeared on Motley Fool
