The TUI (LSE: TUI) share price has made a solid start to the year. The stock has jumped 7% in early deals this morning, the first trading day of 2022.
It looks as if investors have been buying back into the business on news the Omicron coronavirus variant is not as severe as initially thought. This could suggest the global travel market is set to reopen over the next few months. And that would be a positive development for the TUI share price.
However, as we have learned over the past two years, nothing is guaranteed when it comes to the pandemic. As such, I think three potential scenarios could influence the company’s outlook in the year ahead.
TUI share price outlook
The global travel market will reopen in 2022, and most restrictions will disappear in the best-case scenario. There are already indications consumers are willing to spend more on holidays after two years of disruption. This could generate a double tailwind for the company via a combination of rising sales and higher levels of spending generally.
In the base-case scenario, and the one that I think is most likely for the year ahead, travel disruption will continue, although the market will start to recover. A certain level of uncertainty may persist throughout the year, which could hold back consumer spending. However, in this scenario, I think the TUI share price will be able to put the worst of the pandemic behind it.
In the worst-case scenario, the world will return to the strict lockdowns seen at the beginning of the pandemic. I think this is unlikely, but I am not going to overlook the risks. In this scenario, the company may have to seek another bailout. Such a development could send the TUI share price plunging to new lows.
Buy, sell, or hold?
Considering all of the above, I am cautiously optimistic about the outlook for the stock in 2022. That said, I am in no rush to buy the equity right now. TUI has quite an uncertain future. And after two years of pandemic disruption it has a fragile balance sheet.
It has also been bailed out three times by the German government, and each bailout came with new restrictions. It could be years before the company is able to repay its obligations and move on from the pandemic’s disruption.
Still, if the company does return to growth in 2022, I think the stock can continue to move higher as the market reevaluates the enterprise as a recovery play. While this happens, I am happy to sit on the sideline and wait for further concrete evidence of the group’s return to growth. There is no telling what could be just around the corner for the business.
