On Thursday, HSBC analysts upgraded Amadeus (BME:AMA) IT Group SA stock from a Hold to a Buy rating, with an increased price target set at €82.00, up from the previous €70.00. The decision to upgrade the stock comes as HSBC recognizes Amadeus's strong growth momentum, high-quality business model, and competent management team. According to InvestingPro data, the company maintains a "GREAT" financial health rating, with two analysts recently revising their earnings expectations upward.
The analysts highlighted that despite the company's robust performance, Amadeus's shares are still valued close to their historical average when looking at price-to-earnings (PE) ratios. The stock currently trades at a PE of 23.4 times earnings, with a notably low PEG ratio of 0.89, suggesting attractive valuation relative to growth. InvestingPro subscribers have access to 8 additional valuable insights about Amadeus's valuation metrics and growth potential.
HSBC's optimistic outlook on Amadeus is also driven by the company's resilient revenue growth, which is considered to be at a reasonable valuation. The analysts expect Amadeus to generate strong free cash flow (FCF) and believe there is unlikely to be significant mergers and acquisitions (M&A) activity in the near future. This could provide the company with the flexibility to continue its regular share buybacks.
Furthermore, the analysts anticipate that Amadeus will maintain its high dividend payout policy, which has been a key aspect of its appeal to investors. The upgrade and price target raise reflect the confidence HSBC has in the company's ability to sustain its financial health and reward shareholders.
Amadeus IT Group SA, listed on the Bolsa de Madrid as AMS (VIE:AMS2):SM and over-the-counter in the United States as OTC: AMADY, is a major provider of software solutions for the travel industry, including airlines and hotels.
With a market capitalization of $30.4 billion and impressive revenue growth of 13.3% in the last twelve months, the company has established itself as a dominant player in the travel technology sector. The firm's enhanced valuation by HSBC signals a positive outlook for the company's stock in the eyes of the analysts.
In other recent news, Amadeus IT Group SA experienced a notable shift as Bernstein SocGen Group adjusted its rating on the company's shares. The firm downgraded the stock from Outperform to Market Perform and slightly lowered the price target from EUR71.50 to EUR71.00. The downgrade occurred despite Amadeus IT's strong foothold in the Air distribution and Air IT sectors, which together generate over 60% of its EBITDA.
Amadeus IT has also been making strides in the GDS business, although growth here has been slower. The company has successfully secured new contracts for its Air IT services, including nine major airlines since 2019. Bernstein SocGen Group commended Amadeus IT's robust balance sheet and shareholder return strategy, anticipating around a 14% annual Total (EPA:TTEF) Shareholder Return in a steady state.
Bernstein SocGen Group also noted the company's well-invested products, such as the recently launched Nevio, which could potentially lead to more contract wins in Air IT. The firm mentioned slower-than-expected contract announcements following a major deal with British Airways but acknowledged the likelihood of Amadeus IT gaining additional market share.
The revised price target is based on a 19.0x multiple of the firm's 2026 EPS estimate of EUR3.8, with lowered estimates accounting for a decrease in near-term revenue per passenger boarded. These developments are part of recent changes in the company's performance and strategy.
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