Broker snap: Time to buy Go Ahead, Goldman says
Goldman Sachs has upgraded its recommendation on the bus and rail operator Go Ahead Group to 'buy' from 'neutral' but cut its target price to 2,000p from 2,400p.
It said Go Ahead's current low valuation overestimated the risks to profitability from higher fuel costs in 2008/09.
The damage caused by Go Ahead's expected loss of the Southern rail franchise has also been overestimated, the broker said.
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It added that the company may benefit in the next six months from the start of a UK-wide concessionary fare scheme, more people travelling by train and inflation-busting fare rises.
However, it also cut its 2008-2010 earnings per share estimates, citing the disposal of Go-Ahead West Midlands, the predicted loss of the Southern franchise and higher fuel costs.
