TUI share price surges as Morgan Stanley lifts rating on tour operator

Analysts argue profit warning has left shares ‘attractive’

TUI share price surges as Morgan Stanley lifts rating on tour operator

Shares in TUI Group (LON:TUI) have jumped higher in London in today’s session, as Morgan Stanley lifted its rating on the blue-chip tour operator, arguing that the recent profit warning had left the stock attractive. The comments came after the FTSE 100 group cut its earnings forecasts in an update last month, attributing the move to last year’s heat wave as well as the continued sterling weakness.

As of 12:46 GMT, TUI’s share price had added 5.38 percent to 811.40p, outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.46 percent higher at 7,191.88 points. The group’s shares have lost just under 47 percent of their value over the past year, as compared with about a one-percent gain in the Footsie.

Morgan Stanley upbeat on TUI

Morgan Stanley lifted its rating on TUI from ‘equal weight’ to ‘overweight’ today, with a price target of 1,250p on the shares. Proactive Investors quoted the analysts as commenting that the reaction in the group’s shares to last month’s profit warning was overdone, and that the plunge had left the tour operator’s 8.2-percent dividend yield higher than its earnings multiple, a ‘rare crossover’ which made for an ‘attractive’ valuation.

The broker added that the ‘more plausible’ prospect of the UK’s exit from the EU being ‘softened or seriously delayed’ following the rejection of Prime Minister Theresa May’s withdrawal deal by Parliament this week and the subsequent vote to rule out a ‘no deal’ Brexit should help TUI’s performance.

Other analysts on tour operator

UBS reaffirmed TUI as a ‘sell’ yesterday, slashing its price target on the shares from 1,090p to 740p. According to MarketBeat, the blue-chip group currently has a consensus ‘hold’ rating and an average price target of 1,504p.

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