Technology stocks have flourished whereas travel and tourism stocks have floundered in this market crash. One stock that links these industries together is Trainline Plc (LSE:TRN). Is Trainline a potential opportunity right now or one to avoid? I’m leaning towards the former.
TRN offers a one-stop shop for booking trains and coaches across the UK and Europe using its platforms. In June 2019, it reported it receives approximately 80m visitors per month to its platforms, which include a website and mobile app.
Market crash opportunity
In January 2015, Trainline was sold to American global investment firm KKR, which undertook a highly successful IPO in June 2019. June 2019 seems like a very long time ago right now. Between then and now, a lot has occurred. A global pandemic and one of the UK’s worst recessions on record spring to mind.
Prior to the market crash, TRN shares were trading at 552p per share. Approximately a month later, its share price tumbled to a low of 202p, which is a 63% decrease in value. Since that low, TRN’s share price recovered to 532p per share at the end of May. As I write this, however, I am able to buy shares for 290p.
The economic downturn coupled with uncertainty around Covid-19 has seen TRN’s share price experience a rollercoaster ride over the past few months. That being said, I still feel there is a longer term opportunity to be had here with TRN. At its current price point, it is an excellent FTSE 250 bargain in my opinion.
Half-year results
This morning saw the release of half-year results for the six months ended 31 August 2020. On the face of it, the results made for sorry reading but the market crash and downturn have severely damaged the travel sector.
First-half net ticket sales for TRN amounted to £358m. This figure equates to 19% of the whole prior year period. Compared to the same period last year, it is a whopping 81% decrease. Q2 was a more encouraging trading period. This was when the first lockdowns ended and restrictions eased.
In its international market, TRN’s top three domestic markets returned to growth. UK consumer ticket sales recovered faster than the market at 30% compared the same period last year and the industry passenger volume which stood at 24%. TRN also exceeded new customer numbers pre-Covid-19. TRN did also mention despite cost cutting measures it continued to invest in its tech infrastructure.
Why I like TRN right now
TRN might be seen as a market crash contrarian buy right now. I believe it is an excellent opportunity and at its current price it is so much more attractive. I don’t worry too much about the H1 results. We are living in unprecedented times. TRN has cut costs and confirmed it has approximately £162m in cash to help navigate further economic fluctuations.
I find solace in Trainline’s record of success and its standing in its respective industry. TRN is a powerhouse and is in many markets across the world. Additionally, I see pent up demand benefitting TRN when the market normalises. In the UK alone, the government is heavily invested in the rail industry and infrastructure for many years ahead. Thinking longer term, I believe TRN is a cheap market crash bargain right now.
