The TUI (LSE:TUI) share price has had a terrible 2020. I feel it could be in more trouble in 2021 on the back of the government announcement regarding British residents arriving in the UK being asked to quarantine hotels.
TUI share price and 2020 woes
As I write this, the TUI share price sits close to 341p per share. This is nearly 65% lower than January 2020 levels. The Covid-19 vaccine breakthrough provided the whole of the market a shot in the arm. It caused the TUI share price to shoot up to 546p per share. The FTSE as a whole did not react as well as the price rise TUI experienced.
Since that high, however, TUI has fallen nearly 40% once more to current levels. Several things bother me when it comes to the TUI share price and investment viability, however.
Firstly, pent-up demand when business resumes could cause a huge hike in share price, which I believe could overvalue TUI. Secondly, it has taken on further debt to keep the lights on, which does not bode well. Finally, it is raising capital by placing new shares worth approximately €545m. Although I prefer this approach over new debt, any new share issue dilutes existing shareholders which never sits well with me in a company in the position of TUI.
That said, there is recovery potential in 2021 and beyond for TUI. Alongside its airline, it offers package holidays and is still the largest travel and tourism firm in the world. I believe it will survive the pandemic and return to normal at some point due its diversified offering and reach.
FTSE AIM opportunity for 2021
FTSE AIM incumbent Fevertree (LSE:FEVR) had an excellent 2020. I believe it could continue this momentum in 2021 and beyond, making it an enticing prospect for my portfolio. Unlike the TUI share price, the FEVR share price is currently trading nearly 70% higher than pre-crash levels. At the beginning of 2020, shares were trading for 1391p per share whereas right now I can pick up shares for 2,320p.
Fevertree has strong liquidity and very low debt, which has seen it through the pandemic. I believe this will also stand it in good stead for 2021 and beyond. In the US and Europe levels increased by nearly 40% as reported in a trading update in the summer. My confidence towards Fevertree is linked to its ambitious expansion plans in the US and beyond which are already well underway, based on sales levels reported last year. The pandemic has slowed progress somewhat but I still believe Fevertree could have another good year in 2021, which makes it a tempting option.
Despite my optimism, there are still risks involved. Its share price is at its highest level in over two years. There is a chance it may not rise too much further, or reach that previous high. In addition to this, overseas expansion is easier said than done. The pandemic has slowed and could even hinder progress longer term.
FEVR over TUI
The TUI share price and its ongoing issues closely linked to the pandemic are why I will keep an eye on developments but not buy shares just now.
As for Fevertree, it’s a business which is cash rich, has low debt, increased its dividend in September and is growing despite an economic downturn. Here is another option in the same sector that could make me a passive income too.