TUI1: Neutral Stance And Profitability Outlook Will Shape Balanced Risk Reward

Our TUI fair value estimate has increased from EUR 7.30 to EUR 7.90, supported by analysts highlighting Citi's price target hike to EUR 8.50, as well as improving revenue growth, margin outlook, and a slightly lower implied future P E multiple.

Analyst Commentary

Recent Street research on TUI has been mixed, with the headline change being Citi's lift in its price target to EUR 8.50 and a maintained Neutral stance. While this supports our higher fair value estimate, it also underscores that some market participants remain cautious on the near term risk reward, particularly around execution and the pace of margin improvement.

Bearish analysts emphasize that, despite improving fundamentals, TUI still needs to prove that current profitability trends are sustainable across a full cycle and that working capital and balance sheet risks are sufficiently de risked to justify multiple expansion from current levels.

Bearish Takeaways

• Bearish analysts view the new EUR 8.50 price target and Neutral rating as signaling limited upside from current levels, suggesting valuation already reflects much of the anticipated recovery in earnings and cash flow.
• Cautious commentary highlights execution risk around cost savings and capacity planning, with concerns that any disruption in demand or operational setbacks could quickly compress margins and challenge the investment case.
• Some remain wary of leverage and working capital intensity in a more volatile macro backdrop, which could constrain financial flexibility and slow the pace of shareholder returns or reinvestment.
• There is also concern that growth expectations embed a benign competitive and pricing environment, leaving TUI vulnerable if discounting intensifies or if consumer demand softens more than currently modeled.

What's in the News

• TUI AG reaffirmed fiscal 2025 guidance, targeting revenue growth at the lower end of 5 to 10 percent, compared with fiscal 2024 revenue of EUR 23,167 million (company guidance).
• The company raised its underlying EBIT growth outlook to 9 to 11 percent for fiscal 2025, up from prior guidance of 7 to 10 percent, compared with fiscal 2024 underlying EBIT of EUR 1,296 million (company guidance).

Valuation Changes

• Fair Value Estimate has risen moderately from €7.30 to €7.90 per share, reflecting a more constructive outlook on earnings and cash flow.
• Discount Rate has fallen slightly from 8.81 percent to 8.50 percent, indicating a marginally lower perceived risk profile in the updated model.
• Revenue Growth has increased meaningfully from about 1.6 percent to about 2.4 percent, driven by improved top line expectations.
• Net Profit Margin has improved from roughly 3.1 percent to roughly 3.6 percent, supporting higher projected profitability over the forecast period.
• Future P E Multiple has edged down from about 6.1x to about 5.6x, implying a slightly more conservative valuation on forward earnings despite the higher fair value.