By Connor Campbell, Financial Analyst, Spreadex
Stock of the day: TUI AG (LON:TUIT)
The travel firm has been all over in the place in 2017. It quickly spiked above £12 for the first time in mid-February, only to go on a woeful run that left it at a 4 month low of £10.71 by mid-April. TUI then spent May and June lurching between £11 and £12, before finally breaking above that latter level by the end of July, eventually reaching an all-time high of £12.43 at the start of August. TUI AG now sits at a current trading price of £12.28
So what’s been behind TUI’s wild ride? Well, that brief February surge followed news that the company was getting rid of its Travelopia division, ditching the specialist holiday arm in a £325 million sale to private equity firm KKR. Yet just a day later investors had abandoned the stock, despite its Q1 report also containing a 4% rise in bookings for the winter season and an 8.5% increase in turnover.
There was more drama in May as the company revealed its half year results, sparking a 6% sell-off in the space of 48 hours. While it shrank its interim pre-tax losses by a quarter to €310.8 million, aided by impressive showings from its Mediterranean and Caribbean hotels and cruises, investors were concerned about the continued impact of the Turkey and North African drop-off and the flaccid performance from its Northern Europe division. TUI did, at least, reiterate its full year guidance, promising a 10% increase in underlying earnings.
Given where it’s currently trading TUI needs to produce something positive next week. Investors will want to hear of a healthy summer bookings increase, or at least an improvement on what was outlined in May, as well as signs that it can actually deliver the sustained second half turnaround needed to ensure it reaches those aforementioned earnings targets.
TUI Group AG has a consensus rating of ‘Hold’ alongside an average target price of £11.59.
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