Why the TUI share price is a ‘no-brainer’ buy at current levels

With improving results and passenger capacity, the TUI share price is now very appealing.

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Key points

  • For the final three months of 2021, revenue increased to €2.4bn from €500m in the same period in 2020
  • 2.2m passengers flew on TUI aircraft for the three months to 31 December 2021, an increase from 600,000 a year previously
  • More and more countries are dropping all pandemic-related entry requirements 

Covid-19 meant that the travel industry virtually ground to a halt. Every firm in this industry felt the full force of the pandemic and TUI (LSE:TUI) was no exception. The company operates flights, hotels, and cruises. Shares are currently trading at 228.30p, down 33.7% in the past year. With improving financial results and higher occupancy rates, is the firm over the worst of Covid-19? Here’s why I’m buying shares in this business at the current TUI share price. Let’s take a closer look.  

Recent results and the TUI share price

Covid-19 had a devastating impact on the business. For the year ended 30 September, the company reported a loss of €3.2bn in 2020. This figure narrowed to €2.4bn in 2021.

More recent results indicate that the firm is now heading in the right direction.

In a report for the three months to 31 December 2021, the company reported revenue of €2.4bn. This was a major improvement, year on year, when revenue stood at just €500m.

In addition, the loss for the period was €386.5m. This was more than half the figure for the same period in 2020, €790.3m. It should be noted, however, that past performance is not necessarily indicative of future performance.

Improving passenger numbers and occupancy rates

For the three months to 31 December 2021, figures also increased in all segments of the company. Regarding air travel, TUI reported that it flew 2.2m passengers during this period, a load factor of 79%, compared with just 600,000 year on year.

Furthermore, after an almost non-existent 2020, cruises once again began to generate cash. During the same period, revenue from the cruise segment grew to €34.2m. This is a significant increase from the 2020 period figure, €600,000.  

The same trend is visible in TUI’s hotel segment. For the final three months of 2020, hotel capacity was around 5.1m. For the same period in 2021, this had risen to 8.6m. What’s more, the actual occupancy rate for the 2021 period was 64%, compared with 43% in 2020.

This tells me that more hotels are open for business and more holidaymakers are staying in them. This can only be good news for the TUI share price. It should be noted, however, that any future Covid-19 variant could result in operations grinding to a halt. This could prove disastrous for the company.

Despite this, however, international travel does seem to be making a serious comeback. Countries like Norway and Mexico are among a number that have dropped all pandemic-related entry requirements. If this trend continues, and I think it could, the travel industry will be in a much more secure position generally.

Given the improving conditions and better results, I think TUI really is a ‘no-brainer’ buy today for my portfolio. I will be purchasing shares in this giant of the travel sector today. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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