Live Update: I Bought More TUI

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I valued TUI at €8 billion at the beginning of the year. Since then, the stock has dropped 26% to a total market cap of less than €3.5 billion, driven by fears over the Iran war. In my view, this is a clear overreaction:

• Only 8,712 TUI customers were stuck in the Middle East—out of 35 million annually.

• The region isn't a major driver for TUI, and the season was ending anyway (Dubai is a winter destination).

• Two cruise ships are currently stuck and may remain so for some time. That is out of a fleet of 18 (Cruises represent 35% of group EBIT).

• This plus repatriation costs (Rückführungen) will likely hit the quarter, maybe even the year. But FY 2025 group EBIT was €1.4 billion, with a 7% to 10% growth forecast for 2026. Even if EBIT stays flat instead, the market is valuing the company at 5x net income. I am more than happy to take a 20% earnings yield. (The valuation is more complex than that, please refer to my last update).

The most irrational point, in my view, is the fear of higher oil and fuel prices:

• For the cruise business, fuel is only around 10% of the ticket price.

• For the airfare, fuel is more than 40%, but the airfare only makes up 20%–30% of the average TUI holiday. Even a 50% jump in airfare only raises the total package price by 10%–15%. It is highly unlikely customers will stop because of that.

• 85% of this year’s fuel demand is already hedged at roughly $60 per barrel.

• If oil stays in the current $90–$100 range (which isn’t guaranteed), it hits every airline. Fares rise across the board, so the competitive landscape remains unchanged.

• Higher prices might actually increase TUI’s advance payments, lowering the net operating assets needed to produce the current earnings level.

None of this suggests there is no risk. However, if this investment fails, it won’t be because of this specific conflict. Given these odds, I am not comfortable with my position being anything less than 20% of my total portfolio. So I added 3,000 shares at €6.74, increasing my position to 22% of my portfolio.