TUI share price: UBS no longer bearish on group

UBS is no longer bearish on TUI Group (LON:TUI), lifting its stance on the blue-chip tour operator in the wake of the demise of smaller London-listed peer Thomas Cook (LON:TCG). The update comes after TUI updated investors on its recent performance yesterday, reaffirming its full-year earnings expectations.

TUI’s share price, which rallied on the back of the results in the previous session, has taken a plunge today, having given up 5.84 percent to 903.60p as of 11:20 BST. The group’s shares are underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.92 percent in the red at 7,224.26 points.

UBS weighs in on TUI

UBS lifted its stance on TUI Group from ‘sell’ to ‘neutral’ yesterday, and further hiked its valuation on the shares from 740p to 900p. ShareCast quoted the broker as commenting that this week’s collapse of Thomas Cook brought ‘relief to overcapacity’. The analysts further noted that their upgrade reflected expectations of an improvement in short-term profitability and free cash flow in the wake of Thomas Cook’s demise.

“However, after the circa 7% price increase yesterday we think the share price seems to reflect a good part of these positive effects,” UBS pointed out, adding that it was also “less convinced about the mid-term benefits of the market consolidation” and “expect in the context of low entry barriers incremental capacity to come to the market over the next 12-24 months”.

As a result, the broker reckons that that the recovery TUI’s profitability will be short-lived before pressure on tour operator margins re-emerges.

Other analysts on group

Barclays reaffirmed the FTSE 100 tour operator as an ‘equal weight’ today, without specifying a target on the TUI share price. According to MarketBeat, the company currently has a consensus ‘hold’ rating, while its average valuation stands at 1,025p.