These Analysts Think TUI AG's (ETR:TUI1) Sales Are Under Threat

One thing we could say about the analysts on TUI AG (ETR:TUI1) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue estimates were cut sharply as analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the latest consensus from TUI's 18 analysts is for revenues of €7.8b in 2021, which would reflect a substantial 285% improvement in sales compared to the last 12 months. Prior to the latest estimates, the analysts were forecasting revenues of €8.7b in 2021. The consensus view seems to have become more pessimistic on TUI, noting the substantial drop in revenue estimates in this update.

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We'd point out that there was no major changes to their price target of €2.56, suggesting the latest estimates were not enough to shift their view on the value of the business. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on TUI, with the most bullish analyst valuing it at €4.70 and the most bearish at €0.90 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. With this in mind, we wouldn't rely too heavily on the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that TUI's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 14x growth to the end of 2021 on an annualised basis. That is well above its historical decline of 11% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 17% annually. Not only are TUI's revenues expected to improve, it seems that the analysts are also expecting it to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. The analysts also expect revenues to grow faster than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on TUI after today.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with TUI's business, like major dilution from new stock issuance in the past year. Learn more, and discover the 1 other flag we've identified, for free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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