The Motley Fool

Why I think now is a good time to buy this FTSE 250 UK tech share

Image source: Getty Images.

When Trainline (LSE: TRN) issued its trading update at the end of last year, the reaction from the press and analysts was largely positive. Given that revenue was up 26% and international revenue increased 90%, this was hardly surprising. Despite this, shares tumbled. I think this has created a good time to jump on board the Trainline express. 

Trainline’s strengths 

Trainline boasts an impressive team of technology experts and has been turning heads for the way it applies agile working practices. That, coupled with its expertise and technology in online booking engines, is what makes it interesting. I like it because the technology is good, and its ability to develop the technology is proven.  

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

The story of the Trainline share price, from IPO to today 

The company floated last June. There are usually good reasons, as Warren Buffett himself has pointed out, to be reluctant to buy at the time of an IPO. There is plenty of evidence to back this idea up. Consider, for example, the fortunes of Aston Martin since its IPO. But, it is not always the case. The cheapest that shares in Alphabet/Google have ever been was at IPO. Trainline could be another exception to the rule. 

In fact, shares in Trainline surged at IPO, at one point up by a fifth. Then the inevitable happened.There was a stock market reaction.

Since 17 December, when the trading update was released, shares have fallen from 520p to 469p. Sure, they are still higher than the IPO price — 411p — but they may fall further before recovering.

These things are impossible to predict exactly, but I believe that Trainline shares are in fact on a journey heading north, with just the occasional short-term reversal en route.

Why did the Trainline share price fall?

How do we explain the fall in the share price? The company underestimated the cost of the IPO, meaning that the company made a loss in its first half. However, we knew about that last September, a long time before Trainline shares fell so sharply.

Another reason for the fall lies with the recent announcement that Virgin Rail, squeezed out of the train operation business, is launching its own train booking system. Markets may have chosen to ditch the shares because of news of a potential competitor, but Trainline was never going to have the UK train booking business to itself forever. 

Also, Trainline has responded with a split ticketing option, enabling travellers to book two or more tickets on the same journey at a saving.

Bigger fish, a bigger ocean creates the opportunity 

Trainline’s strength lies in its ability to build on its technology and generate business overseas, coupled with the potential to eventually diversify into other sectors, such as a booking engine for car sharing. 

In the longer run, Trainline’s competitors won’t just be companies like Virgin Rail in the UK, they will be companies with their own booking engines across the globe, for trains and all other forms of transport. The Ubers of this world are also in this space.

Trainline operates in a market with enormous potential, which is why I like its chances.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Matt Baxter has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Where to invest £1,000 right now

Renowned stock-picker Mark Rogers and his select team of expert analysts at The Motley Fool UK have just revealed 6 "Best Buy" shares that they believe UK investors should consider buying NOW.

So if you’re looking for more top stock ideas to try and best position your portfolio in this market, then I have some good news for your today -- because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.