The TUI share price is up 162% in a year. Do I see it rising higher?

TUI’s latest financial results are expectedly disappointing, but its share prices has been on the rise in the past year. Can it continue its momentum?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

In an article I just wrote on the coach operator National Express, I say that it is better placed than some other travel stocks. One reason for this is its relatively healthy financials. This is in stark contrast to the stock under consideration here, the German tourism group TUI (LSE: TUI).

TUI reports weak results

TUI just released its results for the first half of its financial year ending 31 March 2021. As expected, it looks like it is in a precarious position. It has reported an 89% fall in revenue and an 84% increase in losses from the first half of last year. It was hit by the pandemic across all segments, but cruises were the worst affected.

Investors have reacted negatively, as evident from a 2% fall in the TUI share price in today’s session so far. But considering the difficulties the company is still in, I think the extent of the fall is contained. 

This could be because a poor result was already expected. And also, because the future looks brighter. As vaccinations progress and people can travel more freely, tour operators like TUI may see a rise in demand again. 

It already expects to carry some 2.6m customers in its summer programme. But the real increase is only expected to come through next year. For summer 2022, TUI expects UK bookings to be up by 293% from 2019 levels.  

What is next for the TUI share price

I think it is exactly this anticipation that has driven up TUI’s share price so far, which is up 162% in a year.

But at a level of around 420p, the share price is still a far cry from its pre-pandemic levels. This to me suggests that as its performance starts improving through 2021, investors could be encouraged to buy the stock. This in turn could improve its share price further.

But I am not certain that this scenario will play out. 

Another cruise operator, Carnival, just cancelled most of its planned sailings for 20 of its 24 vessels for the period up to the end of July. Until last week, its cruises were paused up to the end of June. Concerns about getting regulatory approval because of the pandemic are the reason for this change. 

To me, it also suggests that these cancellations could be extended beyond July. In other words, it is possible that leisure travel may take longer than we presently anticipate to swing into action. 

And that could have a negative bearing on the TUI share price as well. 

My takeaway

I think moving forward, the TUI share price will respond to a combination of factors. On one hand, its financials look dismal and news from Carnival is disappointing too. But a stock market rally is underway too and investors have extended bullishness to TUI as well. The pandemic has also been controlled to a great extent. The TUI share price may or may not rise higher.

I find it risky at present. I would wait for concrete signs of its revival before buying TUI.  

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh owns shares of National Express Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »