TUI AG (LSE:TUI) was upgraded by Citi as the bank recalibrated after the travel group's rights issue and upbeat update last week.
After completing its rights issue last month with the shares going ex-rights on 28 March, the Anglo-German group reported strong demand for travel bookings across all markets.
Citi analyst Leo Carrington updated the bank's forecast model for the company to reflect terms of the rights issue, upgrading to a 'neutral (high risk)' rating from the previous 'sell (high risk)' stance.
"With the stock having abruptly de-rated 22% since trading ex-rights we see valuation upside," the analyst wrote.
Explaining further, he said that beyond "the opportunity embedded in the current valuation", TUI was given a neutral rather than a buy rating amid a context of summer 2023 booking volumes still being down 11% compared to pre-pandemic 2019 as of 5 February, though the latest statement is "suggesting some upside to these levels".
Citi's share price target was also cut to 750p, reflecting the higher-than-expected dilution from the rights issue and the application of a wider discount to competitors, but unchanged earnings estimates.
"The volatile and uncertain economic outlook combined with the recent share price performance driven by the rights issue dynamics also to some extent highlights the limited institutional investor interest," the analyst said.