Buy TUI shares or not? In this TUI stock analysis, you will read important insights about the travel organization. From strategy to strengths and weaknesses. Including risk analysis and price expectations of TUI shares. After our analysis we are of the opinion that TUI is not a good investment compared to better investments.
In this analysis we explain why.
Stock Analysis: TUI (TUI1)
TUI is a group of integrated travel companies based in Germany. The company has a presence in 180 countries and serves 20 million customers worldwide. To fully integrate its operations, the company has acquired major tour companies, including Thomson, Fritidsresor, and Nouvelles Frontieres, as well as hotel chains RIU and MagicLife.
TUI's business falls into the following segments
- Hotels & Resorts: This segment consists of all group-owned hotels and hotel investments.
- Cruises: This segment consists of Marella Cruises, Hapag-Lloyd Cruises, and the joint venture TUI Cruises.
- Destination Experiences: This segment is responsible for delivering services to destinations.
- Northern Region: consists of the Group's travel companies and airlines in the United Kingdom, Ireland, Scandinavia, Russia, and Canada.
- Central Region: Includes tour operators in Germany, Austria, Poland, and Switzerland, as well as airlines in those countries.
- Western Region: This segment consists of Belgium, the Netherlands, and France tour operators.
- All other segments: is responsible for taking care of operations in new markets, corporate functions, and tourism-related activities.
Buying TUI stock means you are investing in the travel sector. To determine if TUI is the best buy, you will basically have to analyze all travel stocks. If you do not do this, you could better go for ETF investing instead.
This is also how we select the best stocks. We do rigorous research on strong companies. We want to invest in the strongest companies in each industry, but also at an attractive stock price.
TUI (TUI1) Strategy
TUI's integrated business model remains a success factor for the long term and remains a core element of its strategy. Following are a few of the company's strategies:
- Developing scale in the "things to do" market and attracting customers to join the TUI eco-system.
- Accelerate realignment program to emerge leaner, stronger, more flexible, and digital from the crisis.
- Expanding assets, transforming business, driving profits, and benefiting from vertical integration.
- TUI Group considers economic, environmental, and social sustainability to be an essential part of its strategy for continually enhancing its value. That is how the company wants to create the conditions for long-term economic success and assume responsibility for sustainable business transformation in the tourism sector.
- TUI Group is creating a work environment enabling its employees to remain fully and passionately committed to the company even in these difficult times.
Strengths and Weaknesses of TUI (TUI1)
Buying TUI shares means investing in a travel organization. The long-term success of TUI shares depends on its strategy and strategic execution. If TUI makes more profits over time, TUI shares will have a more attractive financial valuation.
Below you will find an overview of strengths and weaknesses of TUI, which can directly impact its share price in the long term.
Strengths of TUI (TUI1)
TUI, one of the top players in its industry, has many strengths that allow it to prosper in the marketplace. As a result of these strengths, the company can maintain market share in existing markets and penetrate new ones. TUI's strengths include –
- The TUI group operates aircraft and charter planes to over 150 destinations across the globe.
- Increasing profits were a major factor in the growth of the company.
- The majority of holidays are sold directly to individuals.
- The most profitable and fastest-growing markets for TUI are the UK and France.
- Personalized holidays are available through TUI.
- A strong position as a long-distance travel leader.
- Over 50,000 employees are with the company.
- Over 30 million customers worldwide prove TUI's dominance in the industry.
- With a strong distribution network, TUI has reached the majority of its potential market over the years.
- With a dedicated Customer Relationship Management department, the company has been able to achieve high levels of customer satisfaction and good brand equity with the current customers.
- Through mergers and acquisitions, the company has successfully integrated complementary firms. As a result of integrating a number of companies and hotel chains in the past few years, the company has been able to simplify operations and build an efficient supply chain.
Weakness of TUI (TUI1)
Weakness is the area where TUI can improve upon. A few of the company's weaknesses are:
- R&D investment is below that of the fastest-growing companies in the industry. Managing offices for a global tourism brand comes with cultural and social challenges.
- Limited brand loyalty arose from the intense competition with other companies.
- The company has been unable to effectively deal with the challenges presented by new entrants in the segment and has lost a small share of the market in niche categories. To overcome these challenges, TUI must build an internal feedback mechanism from the sales team on the ground.
- Inability to integrate firms from different cultures.
- TUI has a higher attrition rate in its workforce than other companies in the industry, meaning it spends more than its competitors on the training and development of its employees.
Threats and Opportunities for TUI (TUI1)
Threats and opportunities also affect the future stock price of TUI. Below are some points of interest regarding investing in TUI stock.
Threats to TUI (TUI1)
- Pandemic restrictions are causing the highest threats for the company, as tourism and travel restrictions are still valid in some countries
- Competition is fierce. There has been an increase in players in the industry over the last few years, which has put downward pressure on both profits and sales of the company.
- As the company operates across numerous countries, currency fluctuations can be a problem, especially given the unstable political climates of many of the countries where it operates.
Opportunities for TUI (TUI1)
- Integrate Apps for reservations and to book holidays. Through this, the firm will maintain its loyal customers while attracting new ones with value-oriented propositions.
- Taking advantage of the post-pandemic uptick and increase in customer spending after staying at home for more than two years, TUI can capture new customers and increase its market share.
- TUI should broaden its operations into emerging markets to expand its market share.
- "Better Holidays, Better World" is the TUI group's sustainability strategy. That is an excellent opportunity for TUI to demonstrate its superiority in the sustainable tourism arena.
- In times of environmental turbulence, it is important to analyze the emerging market trends. There are a number of trend analysis techniques TUI can use to accomplish this, including marketing mix models, risk models, choice models, and customer analyses.
- Furthermore, TUI should keep an eye on the political, legal, regulatory, social, and economic factors that influence the market.
Risks analysis of TUI (TUI1)
If you want to Buy or sell TUI AG stock, you should deeply analyze TUI risk analysis. TUI (TUI1) is listed on the Frankfurt Stock Exchange in Germany and employs 60,135 people. With a market capitalization of $3.9 billion, the company currently falls under the 'Mid-Cap' category.
The company's share structure is as follows:
- 41.5 percent – Institutional investors
- 24.9 percent – Private investors
- 24.9 percent – Unifirm Ltd (controlled by the Mordashov family)
- 5.1 percent – DH Deutsche Holding Ltd
- 3.6 percent – RIU Holdings.
The biggest risk in not buying TUI stock is its debt position. A company with high debts always poses more risk. Moreover, the situation with travel restrictions has not yet completely disappeared. This fact may reduce profits in the long run.
With 3.1 B in total debt and a debt-to-equity (D/E) of 94.2, the company may have a difficult time generating enough cash to satisfy its financial obligations. Its current ratio is 0.51, indicating negative working capital, making it less likely that it will be able to repay financial obligations on time and when they become due. TUI AG can use debt until it runs out of free cash flow or until it runs out of new capital. So, TUI AG's shareholders could lose everything if the company cannot repay its debts as required by law.
Price Target of TUI stock (TUI1)
According to Market Screener, based on analysts' offering, the average price target for TUI1 stock is €2,38, with a high estimate of €3,30 and a low estimate of €1,90.
According to Wall Street Journal, based on analysts' offering, the average price target for TUI1 stock is €2.38, with a high estimate of €3.54 and a low estimate of €1.75.
Conclusion: to buy TUI shares or not?
We have not made an extensive analysis of TUI shares. We can therefore not indicate what a realistic price expectation of TUI shares is. It is true, however, that we see a lot of risks, with the debt position being particularly worrisome. Why take the risk, when there are much better buys? For example, within our shares subscription we realize higher returns (than the SP500) with our Value investments. TUI is definitely not one of them.
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