On Monday, Goldman Sachs (NYSE:GS) adjusted its price target for Amadeus IT Group SA (AAD:GR) (OTC: AMADY), a leading technology provider for the global travel industry. The new price target is set at €77.00, down from the previous €78.00, while the firm continues to endorse a Buy rating for the stock.
The revision reflects a nuanced view of the company's prospects, acknowledging the challenges within the Air Distribution business, a segment that has been a focal point for bearish concerns.
Despite this, Goldman Sachs recognizes the value in Amadeus's other divisions, specifically Air IT and Hospitality, suggesting that the current share price might not fully account for the potential of these sectors.
The investment firm's analysis suggests that Amadeus's valuation, at 16.3 times price-to-earnings (P/E) based on the 2025 estimated earnings, is appealing.
This is especially so given the projection of a 15% compound annual growth rate (CAGR) in earnings per share (EPS) over the next five years. This growth is anticipated to be bolstered by the company's share buybacks, which are expected to average about 3% of the market capitalization annually.
Goldman Sachs emphasizes that, despite the lower price target, the outlook for Amadeus remains positive. The firm anticipates approximately 35% upside from the current valuation, based on their 12-month price target.
This assessment is made in the context of what the firm sees as an underappreciation of Amadeus's IT divisions or a market price that already factors in limited value for the Air Distribution segment.
InvestingPro Insights
Amadeus IT Group's stock, as analyzed by Goldman Sachs, also presents interesting data when viewed through the lens of InvestingPro's metrics and tips. With a market capitalization of $26.25 billion and a P/E ratio of 20.14, the company appears to be trading at a moderate valuation relative to its near-term earnings growth. This aligns with the Goldman Sachs perspective that the stock may be undervalued, especially considering its 14.25% revenue growth over the last twelve months as of Q2 2024.
InvestingPro Tips suggest that Amadeus is currently in oversold territory, as indicated by the RSI, which could imply potential for a rebound. Moreover, the company's stock generally trades with low price volatility, providing a level of stability for investors. For those seeking further analysis, there are 10 additional InvestingPro Tips available, including insights into earnings revisions, debt levels, and profitability predictions for the year (https://www.investing.com/pro/AMADY).
Furthermore, the company's strong fundamentals are highlighted by its gross profit margin of 43.7% and an operating income margin of 26.81%. These robust margins are indicative of the company's efficient operations and potential to generate shareholder value. With analysts predicting profitability this year and the company having been profitable over the last twelve months, the outlook for Amadeus IT Group remains positive. The InvestingPro Fair Value estimate of $65.75 also suggests some room for growth compared to the current price of $63.10.
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