Liberum slashed its price target on National Express on Monday to remove upside from the Stagecoach deal, which has fallen through.
The broker, which has a ‘buy’ rating on the shares, cut the price target to 290p from 365p.
Last week, Stagecoach agreed to be bought by German asset manager DWS in a £595m cash deal, withdrawing its support for a previously-agreed £470m deal with National Express.
Liberum said: “Although National Express is reserving judgement on how it reacts, we doubt that the group is either willing or able to put together an improved offer that would be more appealing to Stagecoach shareholders.
“We strongly suspect that Stagecoach’s shareholders would prefer cash consideration. In uncertain times, the certainty and faster completion offered by a cash offer from a non-trade buyer is likely to be preferred, even at the risk of foregoing the longer-term upside potential offered by National Express shares.”
The broker said the proposed Stagecoach acquisition complemented the strategy of National Express, but was not central to it. It argued that while the deal had compelling synergies, “it was not a must-do deal”. As a result, increasing the price paid materially is likely to be unappealing to National Express management.
Liberum also noted that passenger volumes are 70-80% of pre-pandemic levels and said it expects the recovery to continue.
“However, there has been a delay from the Omicron variant and driver shortages in the North American school bus business,” it said.
“We have reduced our forecasts accordingly. Long-term growth should be underpinned by decarbonisation, which will require modal shift in favour of public transport.”
