Citi Upgrades TUI Shares to Neutral, Sees Valuation Upside

Citi upgraded TUI (LON: TUI) to Neutral from Sell in a research note on Tuesday, with the firm updating its model to reflect the recent rights issue.

The stock has abruptly de-rated 22% since trading ex-rights, Citi analyst Leo Carrington told investors, adding that he sees a valuation upside.

However, Citi sees TUI at Neutral rather than Buy in the context of summer 2023 as booking volumes are still down 11% compared to 2019 at February 5, although the analyst noted a recent statement from the company suggesting some upside to these levels.

“The volatile and uncertain economic outlook combined with the recent share price performance driven by the rights issue dynamics also to some extent highlights the limited institutional investor interest,” the analyst wrote.

TUI shares were up 2.5% in early trading on Tuesday, while they are down 3% on Wednesday.

The rights issue, which was announced in February, raised €1.8 billion for the company. The proceeds will be used to strengthen TUI's balance sheet and reduce its hefty debt pile.

In its latest update, TUI (LON: TUI) said that summer 2023 booking volumes are still below 2019 levels, but they are showing signs of improvement. The company added that it is confident that it will be able to recover to pre-pandemic levels by the end of 2023.

“Booking momentum remains encouraging with strong demand for Easter holidays. We anticipate capacities to be close to pre-pandemic levels, we expect a good Summer 2023,” said TUI Group CEO Sebastian Ebel earlier this month.