Berenberg lowers target price on Tui

Analysts at Berenberg cut their target price on travel group Tui from £3.50 to £2.50 on Monday, stating that while a Covid-19 vaccine might cure the coronavirus itself, it did nothing to aid the firm's capital structure.

Berenberg said while the emergence of vaccines for Covid-19 and a further finance package from the German government has given Tui's shares "a real shot in the arm", it sees "little reason for increased enthusiasm in the shares", despite its optimism that "we will all go on holiday again".

"We have absolutely no doubt that there is pent-up demand from the consumer for a holiday and that this will be one of the first things that people do once travel sanctions and the Covid-19 overhang lifts," said Berenberg.

"However, we think there will be travel limitations well into 2021 and expect that 2022 will be the first year when normality will return, and that operational performance will not return to 2019 levels until 2023, excluding any impact from further 737 MAX issues."

The German bank pointed out that Tui's new funding package provided further "breathing space" as far as liquidity was concerned, although it also believes that the company still faces "uncertainty".

"For now we retain our view that the business will survive, although this still hangs in the balance," said Berenberg, which also reiterated its 'sell' rating on the stock.