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Investing.com - Barclays (LON:BARC) upgraded TUI (LON:TUIT) AG (TUI1:GR) (OTC:TUIFY) stock rating to Overweight from Underweight on Friday, while raising its price target to EUR11.00 from EUR7.70.
The upgrade follows Barclays’ complete rebuild of its financial model for the travel company, which the firm described as a "very complex business." Despite the wholesale changes to the model, Barclays’ EBIT and net profit estimates were not significantly altered from previous projections.
Barclays positioned itself marginally ahead of consensus for TUI’s fiscal year 2025 EBIT, while taking a more conservative stance for subsequent years. The firm’s net profit estimates fall below consensus due to higher projected interest costs.
The research firm substantially lowered its net debt estimates for fiscal years 2025 and 2026 compared to previous calculations, suggesting greater value in the company. Barclays also revised its valuation methodology to a three-stage value creation DCF model, driving the significant price target increase.
Barclays noted that even on its below-consensus estimates, TUI appears inexpensive on multiple metrics and "very inexpensive" on its sum-of-the-parts analysis, with the firm highlighting both an "interesting earnings momentum story" and "potentially fascinating strategic evolution" for the travel operator.
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