Five 'buy' rated European travel stocks
Travel is among the sectors that has been impacted by fears that US president Donald Trump's trade war will lead to a recession, with concerns that an economic slowdown could see consumers spend less on holidays.
However, the UK's trade deal with the US, announced last Thursday, and Washington's agreement with China to slash tariffs on each other's imports by 115% for 90 days, announced on Monday, have offered some relief to investors.
That said, the nature of a longer-term trade agreement with China is still unclear, keeping an element of uncertainty looming over markets.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: "Fears that US tariffs could squeeze consumers and cause a global economic slowdown have been weighing on sentiment in the travel sector. But with first-quarter earnings season drawing to a close, it's become clear that overall demand for travel and leisure has held up well."
With that in mind, here are five stocks in the travel sector that analysts have given a "buy" rating.
Shares in Tui (TUI1.DE) tumbled after the German travel operator flagged a slight slowdown in summer bookings, in its second quarter results on Wednesday.
Tui (TUI1.DE) said that while summer 2025 bookings were "robust", they were "slightly down at -1%, based on flat risk capacity in a competitive environment with our focus on growing dynamically, protecting margin and reducing cost."
The company posted a 1.5% increase in revenue for the second quarter to €3.7bn (£3.11bn). For the first half, revenue came in at €8.6bn, which was up nearly 8%, but was below Deutsche Bank's (DBK.DE) consensus of €8.7bn.
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The company posted a loss of €156m for the first half, which was better than Deutsche Bank (DBK.DE) projections of a loss of €175m.
Tui (TUI1.DE) reiterated its 2025 fiscal year guidance of expecting top line growth of 5% to 10%, and an increase in underlying earnings before interest and tax (EBIT) of 7% to 10%.
In a note published after the release of the results, Deutsche Bank's (DBK.DE) Andre Juillard and Shubhi Bansal reiterated their "buy" rating on the stock.
They said: "Tui (TUI1.DE) was deeply impacted during the COVID pandemic, but thanks to three consecutive rights issues and a solid recovery, this period finally seems to be over ... The balance sheet has been cleaned since FY23.
"Tui (TUI1.DE) is now back to a more solid financial situation ... The results are solid and margin protection clearly remains key focus of management. Moreover the stock's valuation remains particularly low."
Holiday group On the Beach (OTB.L) said it was on track for another record year, in its interim results, published on Tuesday. Even so, shares in the company are flat year-to-date.
In the first half of its fiscal year, On the Beach (OTB.L) posted a 7% increase in revenue to £64.2m and an 18% increase in profit before tax to £3.3m.
The company said its board was confident about delivering profit for the fiscal year 2025 in line with the current consensus expectations, of adjusted profit before tax of £38.2m.
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In a note on 3 April, Deutsche Bank's (DBK.DE) Richard Stuber had a "buy" rating on the stock and a spokesperson for the bank said that this rating has not since changed.
"On the Beach (OTB.L) has reported TTV [total transaction value] growth, year-to-date of +10% yoy," he said. "Similar to its last trading outlook at its prelims in December, this is primarily bookings-led."
"In order to normalise for Easter (falling in April this year vs. March last year), the group has reported that the TTV for holidays scheduled to travel from March to June is +17%," Stuber added. "This compares favourably, and implies market share gains versus Jet2, which reported summer package holidays +4% (albeit seat-only +19%) and Tui (TUI1.DE) with summer bookings from the UK -2% yoy."
British Airways-owner International Consolidated Airlines (IAG.L) reported last week, with its first quarter earnings beating expectations.
The company reported operating profits of €198m in three months to the end of March, which was up €68m in the same period last year and was ahead of analyst estimates of €158m.
Total revenue of €7.04bn, was up 9.6% on the €6.4bn that IAG (IAG) reported in the first quarter of last year.
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Bank of America (BAC) analysts Muneeba Kayani, Othmane Bricha and Baptiste Bourdeau de Fontenay highlighted in a note on Monday that IAG (IAG.L) is around 80% booked for the second quarter.
"IAG (IAG.L) shares are down circa 18% from the early February peak amid concern about a potential slowdown in Transatlantic demand," they said. "We think this is overdone and reiterate our buy rating."
They added that IAG (IAG.L) has "lower corporate exposure in its revenue mix, which is more cyclical than during previous recessions given that the corporate demand recovery has been slower than leisure post-pandemic".
In addition, BofA (BAC) analysts said that IAG (IAG.L) has the "best operating margin among network airlines".
Full-year results from Ryanair (RYA.IR) are due out next week on Monday 19 May, with the company having guided to profit after tax (PAT) of between £1.55bn and £1.61bn.
However, the company provided this guidance in its third quarter results at the end of January, prior to the escalation in Trump's tariff plans.
At the time, Ryanair (RYA.IR) CEO Michael O'Leary said: "The final FY25 PAT outcome remains subject to avoiding adverse external developments between now and the end of March, including the risk of conflicts in Ukraine and the Middle East, further Boeing delivery delays and ATC mismanagement/short-staffing here in Europe."
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Ryanair (RYA.IR) generated revenue of €2.96bn in the third quarter, which was up 10% on a year earlier, while profit after tax jumped €134m year-on-year to reach €149m.
In a note on the airlines sector on 22 April, Bank of America's (BAC) Kayani, Bricha and Bourdeau de Fontenay, reiterated their "buy" rating on Ryanair. A spokesperson for BoA said this rating has not since changed.
In last month's note, BofA (BAC) analysts said that in the full-year results that they would be looking for comments on summer bookings and pricing, as well as on cost guidance, an update on Boeing deliveries and "Ukraine plans in case of a reopening along with an update on aircraft deliveries".
"We will also look for a potential additional buyback as the cash position remains strong," they said.
They forecasted fourth quarter revenue of approximately €2.3bn and net income for the year of €1.6bn.
The analysts said that the company's lower valuation was "unjustified given Ryanair's (RYA.IR) continued market share gains, strong balance sheet and cash flow."
Fellow budget airline easyJet (EZJ.L) is also due to report next week, with its half-year results scheduled to be released on Thursday 22 May.
In the first quarter, easyJet (EZJ.L) posted a headline loss before tax of £61m, though this was an improvement of £65m year-on-year.
The airline said it had a positive outlook for the full year, consistent with consensus, and was on track to achieve its medium-term target of over £1bn profit before tax.
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BofA (BAC) analysts also had a "buy" rating on easyJet (EZJ.L) in their April note, which a spokesperson confirmed had not changed.
"We will look for comments on summer bookings for the airline and the holidays segment, ticket fares, and unit costs [in the first half results]," BofA (BAC) analysts said.
Once again, the analysts said that they viewed easyJet's (EZJ.L) lower valuation as "unjustified, given solid earnings prospect and strong balance sheet".
Given that there is still some uncertainty on trade, investors appear to have shown some sensitivity to any signs of slowdown in company results, which will be key as more businesses in the sector report.
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