Amadeus Upgraded to 'Buy' by Deutsche Bank on AI Resilience, Cash Flow

Deutsche Bank has upgraded Amadeus IT Group (AMA) to "Buy" from "Hold," asserting that the market is overly pessimistic about the potential disruption from artificial intelligence. The bank also raised its price target on the Spanish travel technology company to €71.50 from a previous €58.00.

Analyst Thesis: AI Threat Overstated

According to a note from Deutsche Bank, investors are incorrectly pricing Amadeus's global distribution system (GDS) business as a low-value commodity, assuming that AI agents will erode its booking volumes and pricing power. The bank's analysis, which followed discussions with Amadeus executives and its own experiments with AI travel booking, suggests a different outcome.

Analysts argue that while AI may change how travel searches are initiated, it does not eliminate the need for Amadeus's core infrastructure. This includes essential services like supplier connectivity, payment fulfillment, customer servicing, and disruption management, which remain critical to the travel ecosystem.

To quantify the risk, Deutsche Bank modeled a "hard AI bear case" where disintermediation extends into complex itineraries. The analysis found that even in this scenario, the impact on 2028 earnings-per-share (EPS) would be approximately 5%, an effect the bank described as "manageable rather than a significant earnings cliff."

Valuation Disconnect

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The upgrade is also rooted in a significant valuation gap. A reverse discounted cash flow analysis by the bank implies the current share price is pricing in free cash flow (FCF) growth of only 3.5% from 2028 onwards. This is well below Amadeus's own outlook for a high-single-digit compound annual growth rate for FCF between 2025 and 2028.

Deutsche Bank noted the stock trades at a significant discount to its historical averages, at approximately 14 times estimated 2027 price-to-earnings versus a 10-year median of about 23 times. The bank's new valuation places Amadeus at a 10% premium to the broader software peer group, citing its strong cash generation and mission-critical role in the travel industry.

Forecasts and Risks

Reflecting its more optimistic view, Deutsche Bank raised its EPS estimates for 2027 and 2028 by 1%, while leaving its 2026 forecast largely unchanged. However, the bank also highlighted several potential downside risks for investors to consider:

• A slowdown in global air travel demand.
• Faster-than-anticipated AI-led disintermediation into booking and servicing.
• Pressure on revenue per booking from new distribution models and direct connectivity.
• Slower monetization of its Airline IT division.