In the end, Thomas Cook succumbed to market forces. The 178-year-old travel company collapsed into administration on Monday after failing to secure an infusion of new funds over the weekend. Its demise will ripple across the entire travel industry for months to come. It starts with the repatriation of stranded customers overseas.
As a matter of fact, investors have been suspecting TCG’s ill-health for months. Thomas Cook’s shares price, which traded as high as 140p just 15 months ago, has been going downhill for a while (see Featured Chart). Its death was not sudden. Rather, it was a slow and painful affair. TCG last traded at 3.451p.
While a corporate post-mortem on Thomas Cook will be messy, some related stocks stand to benefit. TUI Travel (TUI), for example, is the last package travel stock standing (see below).
TUI’s shares surged 9% on Monday as investors bet TUI’s market share will expand going forward. This latest rally also affirms a potential base formation on TUI’s long-term stock, which has been in development since April. Technically, prices will need to break 900p to indicate a base breakout.
Other airlines may also stand to win more business. Easyjet (EZJ) surged 5% on Monday as Thomas Cook faded away. Its share prices are poised to break the July resistance. If successful, this will overturn the long-term price downtrend.
For British Airways (IAG), the rally this morning is less impressive due to the ongoing labour dispute. Still, prices have been developing a base pattern since July and prices are at the tip of this base. The stock is gathering strength for a breakout.
All in all, investors are expecting a consolidation of the travel industry due the loss of a key player. Other more successful corporations should benefit.
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Jackson has over 10 years experience as a financial analyst. Previously a director of Stockcube Research as head of Investors Intelligence providing market timing advice and research to some of the world largest institutions and hedge funds.
Expertise: Global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University.