Skift Take
Amadeus' track record of profitable growth has been music to the ears of investors. But some airline and hotel executives claim to hear discordant notes in the giant technology vendor's forecasts.
For years, investors in Amadeus have been bullish on the travel technology group. Their warm vibes toward the Madrid-based company were well captured in January by the headline of a report from Evercore ISI Research: "Amadeus Represents the Future of Travel Technology."
But let's put down the Kool Aid for a moment. There's a bull market in lots of stuff these days, and investors seem to have so many favorites.
Unlike investors, travel industry executives have to take a multi-year view of industry trends. What's their take on Amadeus?
None of the executives we approached would go on the record as critics of the industry heavyweight. But based on the thoughts of a few shared anonymously over a few months, we have put together a takedown on Amadeus's prospects. Purposely contrarian, we hope this summary will encourage debate and critical thinking.
Fourth Quarter
At first, we must concede that sourpusses have to work hard to dislike Amadeus, given that its stock has nearly quintupled in value since 2010.
In the fourth quarter, Amadeus recorded a net profit after taxes of $278 million (€228.4 billion) compared with $187 million (€154 million) a year earlier. Revenue jumped 7.3 percent to $1.42 billion (€1.16 billion).
During Wednesday's fourth-quarter earnings call, Chief Financial Officer Ana de Pro said that the company anticipated a rate of similar growth in revenue and profitability in 2018 as it notched in 2017.
Despite the positive fourth-quarter results, some possible clouds loom on the horizon.
1. Easy Money
The first knock on Amadeus relates to the current expansionary economic times. Travel booms as economies surge and companies that supply technology to the sector should benefit, too.
That said, Amadeus ought to be growing faster than the travel sector on average if one believes its marketing material.
Airlines and hotel companies are at the peak of their business cycles. Now more than ever, they can afford to invest in technology. So at this juncture in the cycle, Amadeus should be signing deals that reflect upfront investments.
In 2017, the company did win several clients.
