Monday 1 July 2019 12:24 pm

Stagecoach shares drop after Deutsche Bank cuts target price

Shares in train and bus operator Stagecoach fell four per cent this morning to 121.7p after Deutsche Bank slashed its target price. 

Read more: Stagecoach profits rise despite UK rail franchise loss

The broker lowered the shares’ target price to 155p from 170p.

The bank said this would allow stable profitability in 2020-21 and a return to growth the following year. 

“We see the various actions (selective price increases, tactical marketing plans, commercial initiatives, bus investments) being taken in regional bus to drive top line growth and to control non-fuel costs,” Deutsche Bank added. 

Stagecoach announced last week that it would no longer bid on new UK rail franchises – which have so far accounted for almost half of its revenue – after its operations end in November. 

The operator is facing the loss of a trio of key contracts after being disqualified from bidding on three major routes: the East Midlands network, West Coast mainline, and a new South Eastern franchise. 

Stagecoach launched legal action against the government in May to challenge these decisions. It said the Department for Transport “breached its statutory duties” by blocking its bid to operate the East Midlands network. 

Read more: Stagecoach sues Department for Transport over West Coast rail franchise loss

Stagecoach reported a £132.9m adjusted pre-tax profit last week, a 3.5 per cent rise. Revenues fell by a third to £1.9bn following the loss of two rail franchises.

Stagecoach declined to comment on the cut in target price.