On Friday, Barclays (LON:BARC) began coverage on TUI (LON:TUIT) AG (TUI1:GR) (OTC: TUIFY), assigning the stock an Underweight rating and setting a price target of GBP7.70.
The firm's analysis points to potential short-term gains for TUI due to strong performance expected in its third and fourth quarters. Despite this, Barclays expressed a stronger preference for competitor Jet2 based on its operational strength, market share gains in the UK, and its net cash balance sheet.
The price target set by Barclays for TUI AG is based on a sum-of-the-parts (SOTP) valuation, which translates to a forward FY25E P/E ratio of 6.0 times. This valuation suggests that there is a 30% upside potential for the stock from its current level.
The firm's stance on TUI AG comes amid a broader evaluation of the travel sector, where Barclays has identified Jet2 as a more favorable option for investors over a 12-month period.
The Underweight rating indicates that Barclays expects TUI AG's stock performance to lag behind the broader market or its industry peers over the next 12 months.
This assessment is in line with the firm's original stance on TUI's London-listed stock (TUI LN). The rating reflects a cautious outlook on the company despite acknowledging the potential for near-term trading strength.
Barclays' preference for Jet2 over TUI AG is attributed to several factors. Jet2's operational strength has been noted as a key differentiator, along with its ability to capture a larger market share within the UK.
Furthermore, Jet2's financial position, characterized by a net cash balance sheet, is seen as a solid foundation for its operations and growth prospects.
The initiation of coverage on TUI AG by Barclays with an Underweight rating and a GBP7.70 price target provides investors with a new perspective on the stock's potential trajectory.
While the near-term outlook suggests some positive momentum, the firm's comparative analysis favors an alternative within the travel operator space for longer-term investment considerations.
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