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On Monday, Bernstein analysts, led by Alex Irving, raised their rating on Amadeus (BME:AMA) IT Group SA (AAD:GR) (OTC: AMADY) from Market Perform to Outperform, while setting a new price target of EUR90.00. The upgrade reflects a positive outlook on the company’s growth trajectory, particularly in its Order Management system, which is gaining significant traction among major airlines. The optimism appears well-founded, as InvestingPro data shows the company achieved impressive revenue growth of nearly 13% in the last twelve months, with a robust market capitalization of $33.57 billion.
The analysts highlighted that the early contract signings for Amadeus’s Order Management system have escalated from a few to many, with British Airways, Air France, and KLM embarking on their transition to the system. This momentum is expected to prompt other airlines to follow suit, as the risks of not adopting the system increasingly outweigh the operational risks associated with the transition. The company’s strong execution is reflected in its exceptional financial health, earning a "GREAT" overall score according to InvestingPro metrics, with a notable return on equity of 26%.
According to Irving, Amadeus is poised to benefit from both upselling opportunities to its existing customer base and a surge in outsourcing, thanks to its robustly invested IT suite. The firm’s position is strengthened by the competitive edge it offers airlines, which is crucial in the industry’s fast-paced environment.
The analysts pointed out that Amadeus’s stock is currently trading at 18.5 times the estimated earnings per share (EPS) for the next year, with an anticipated 10% growth in subsequent EPS and a 2-3% dividend yield. While current InvestingPro data shows a P/E ratio of 25.76, the stock is trading near its 52-week high, suggesting strong market confidence. Subscribers to InvestingPro can access over 10 additional key valuation metrics and exclusive ProTips to make more informed investment decisions.
The upgrade by Bernstein comes at a time when the travel and aviation industry is increasingly relying on advanced IT solutions to streamline operations and improve customer service. As airlines globally accelerate their digital transformation, providers like Amadeus stand to gain from the industry’s evolving needs. The company’s strong market position is supported by its ability to generate substantial cash flows, with InvestingPro analysis indicating sufficient coverage for interest payments and moderate debt levels.
In other recent news, Amadeus IT Group SA has received notable upgrades from two major analyst firms. Bernstein upgraded the company’s stock from Market Perform to Outperform and raised the price target to EUR90.00, highlighting a surge in contract signings with major airlines like British Airways, Air France, and KLM. This move underscores Bernstein’s confidence in Amadeus’s growth trajectory, particularly in its Order Management system. The analysts noted that Amadeus is well-positioned to benefit from upselling opportunities and increased outsourcing activities among its customer base.
Additionally, HSBC upgraded Amadeus IT Group’s stock from Hold to Buy, increasing the price target to EUR82.00. HSBC’s decision was influenced by the company’s strong growth momentum and resilient revenue, which they believe will generate strong free cash flow. The analysts also anticipate that Amadeus will continue its high dividend payout policy, adding to its appeal for investors. Both upgrades reflect a growing positive outlook on the company’s financial health and potential for sustained growth.
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