Well it has been quite a day today so far for two of my Double Bubblers. Firstly Financial Year 2025, Quarter 1 (FY25Q1) results from Tui and then Archer Aviation announcing $300m additional financing to accelerate aircraft development.
Following both announcements the respective share prices have dropped over 10% at the time of writing. Despite this, on looking at the detail and considering the circumstances, I think these declines will be short lived and higher highs for the year are ahead. Here’s why in my opinion…
At the time of writing Tui is down about 10.4% today following what appear to me as broadly positive results, and importantly with Tui still on track according to management to achieve their previously announced sales and earnings guidance for the year ahead. In short Tui’s FY25Q1 revenue is up 13%, summer 2025 bookings are currently 2% ahead of last year and reported earnings before tax and interest up from €0.2m to €42.8m (notably only the second consecutive positive occurrence¹ during Tui’s seasonally weaker time of year). This performance was supported by higher demand at improved prices.
Looking at the detail there is strength in the ‘Holiday Experiences’ side of the business but this was tempered by a weaker performance in ‘Markets + Airline’. The latter weakness reflecting a less favourable situation in the quarter for the Northern Region (where UK bookings were down slightly at -2%, but having improved notably in the last four weeks of the quarter) as well as an aircraft refinancing hit mentioned in the results call. This hit was possibly related to the lease agreement signed in December for 14 aircraft for delivery in 2025 / 2026 and the Boeing 737 MAX delivery delays; which will hopefully be resolved by 2027 according to Sebastian Ebel, CEO.
Aside from summer 2025 bookings being ahead 2%, compared to 8% in the equivalent quarter last year, the other aspect that may have weighed on the results is the marginally higher debt year-on-year, at €4.1b vs €4.0b. However when you consider that Winter 24/25 bookings are ahead 2% year-on-year then the debt is broadly in proportion as before, even with the aircraft refinancing hit.
There is room for positivity in the UK market though. For example according to fairly recent data² average weekly pay including bonuses increased by 5.6%, or 3.2% taking into account inflation. With interest rates having also fallen recently, this may see UK consumers feeling more positive financially and moving ahead with holiday bookings for the year.
To sum up, I think Tui’s results were broadly positive overall, on track for financial year guidance, but tainted by concerns about recent weakness in the UK market. Hopefully Q2 will assuage those concerns (I will be keeping an eye on UK official employment data due next week) and support a strong finish to the year, which we are already seeing signs of hopefully through higher average daily rates charged by Tui. If the year does look like finishing strongly, then that may allow for guidance to be revised up and that will hopefully act as a very positive fillip for the share price.
So now to Archer Aviation which has had quite a week already. Up over 10% yesterday and then down over 10% today at the time of writing. My guess was that the run up in Archer’s share price yesterday (rightly or wrongly) was connected to Archer’s defense industry partner, Anduril Industries, teasing yesterday about exciting news due later today. Whether Archer is connected to the news, only time will tell.
However the $300m financing (and resulting additional 35.5m shares issued) announced³ today by Archer was at a share price of $8.50, so that may well have spooked some investors, hence the share price decline today.
This doesn’t worry me personally, as we have had similar situations in the past and the share price has soon recovered and gone onto higher highs. For example, it is possible a leak of the share price agreed for the last sizeable financing in December took the share price down about 20% in one day (to about $6.73, which was the agreed financing share price if I remember correctly). Not long after this Archer Aviation’s share price was well over $10 share.
Furthermore, as part of the announcement Adam Goldstein, founder and CEO of Archer said, ‘I believe the opportunity for advanced vertical lift aircraft across defense appears to be substantially larger than I originally expected. As a result, we are raising additional capital to help us invest in critical capabilities like composites and batteries to help enable us to capture this opportunity and more.’
Also the fact that Blackrock and others are investing at a price over 26% higher than financing only two months ago speaks of immense positivity about the future to me.
Well it turns out the Anduril Industries announcement was about an exciting partnership with Microsoft* so it seems some of yesterday’s enthusiasm for ACHR may have been misplaced. On a more positive note for me at least, Microsoft is one of my long term holdings.
* Source.