TUI trading statement: can the travel giant reinvigorate its share price?

TUI share price performance: a turbulent journey

TUI's share price has experienced a rollercoaster ride in recent years, reflecting the challenges faced by the travel industry. Over the past year, the stock has shown signs of recovery, with a modest 7% increase. This uptick suggests growing investor confidence in the company's ability to navigate the post-Covid-19 pandemic landscape.

However, when we zoom out to a longer timeframe, the picture becomes more complex. Since 2019, TUI's share price has plummeted by a staggering 78%. This dramatic decline underscores the severe impact of the Covid-19 pandemic on the travel sector and TUI's operations in particular.

Financial performance: signs of recovery

TUI's latest financial results paint a picture of a company on the path to recovery. The summer of 2024 proved to be a positive period for the travel giant, with several key indicators showing improvement. These results have caught the attention of investors and analysts alike.

Revenue growth stands out as a particularly encouraging sign. TUI reported a robust 23% increase in revenue, reaching €22.22 billion. This significant jump suggests that consumer demand for travel is rebounding strongly, with more people booking holidays and experiences through TUI's various offerings.

Perhaps even more impressive is TUI's return to profitability. The company reported profits of €539.30 million, a marked turnaround from the losses experienced during the height of the pandemic. This shift into the black is a crucial milestone in TUI's recovery journey.

When evaluating TUI's financial health, it's also worth considering its price-to-earnings (P/E) ratio. Currently standing at 5.4, TUI's P/E ratio is notably lower than the sector average of 27.3.

TUI’s Tuesday 24 September fourth quarter (Q4) trading statement will likely shed more light on the company’s progress and should give investors a better outlook for the remainder of the year and 2025.

Analyst ratings

According to London Stock Exchange Group (LSEG) Data & Analytics analysts are rating TUI as a buy with 2 strong buy, 6 buy and 5 hold (as of 20 September 2024).

According to TipRanks the TUI share is also rated as a buy with an analyst price target at €8.66, around 29% above the current share price (as of 20 September 2024).

Technical analysis of the TUI share price

The TUI share price is down 7% year-to-date (YTD) versus the DAX 40 trading at record highs, up around 12%. It has nonetheless risen by over 30% from its €5.05 early August low and is testing its April-to-September resistance line at €6.69 after six straight days of gains.

Daily TUI candlestick chart

Were the resistance line to be overcome, the July peak at €6.24 would be back in focus. If bettered, the December 2023, February and June peaks at €7.34-to-€7.45 would be next in line, ahead of the April peak at €8.02.

The medium-term uptrend will be deemed valid as long as the early September low at €5.70 underpins.

Outlook: balancing opportunity and risk

TUI's outlook appears to be a delicate balance of opportunity and risk. On one hand, the company has demonstrated its ability to recover from the unprecedented challenges of the pandemic. The return to profitability, strong revenue growth, and positive analyst projections all suggest potential for continued improvement.

However, the significant debt burden and the inherent volatility of the travel industry cannot be ignored. These factors introduce an element of uncertainty that potential investors must carefully consider. It's crucial to weigh the growth potential against these risks when making investment decisions.

Conclusion: a complex investment landscape

TUI's current position offers a complex and nuanced investment landscape. The company has shown resilience in bouncing back from the pandemic, with encouraging financial results and optimistic growth projections. These factors, combined with a relatively low P/E ratio, could make TUI an attractive option for investors seeking potential value in the travel sector.

However, the high debt levels and the travel industry's susceptibility to external shocks introduce significant risks. Potential investors should carefully consider their risk tolerance and investment goals before making decisions about TUI shares.