Investing.com -- Bernstein analysts downgraded air technology stocks Amadeus (BME:AMA) and Sabre (NASDAQ:SABR) in a note Tuesday, shifting their preference to airlines for better exposure to current industry trends.
Amadeus was lowered to Market-Perform with a target price of €71, while Sabre was reduced to Underperform with a target price of $3 a share.
The analysts cite limited growth prospects and high valuations as key factors behind the downgrades.
Air tech stocks like Amadeus and Sabre have rallied since mid-year as fears of widespread disintermediation in the global distribution system (GDS) sector began to ease.
Bernstein highlighted that "both major listed GDSs are reporting bookings growth," with Amadeus expected to see further acceleration in the fourth quarter as it laps the impact of Expedia (NASDAQ:EXPE)'s shift to direct airline connections.
However, risks remain, particularly for Amadeus's Q4 performance. Bernstein notes concerns around revenue per passenger boarded, projecting it could decline year-over-year, which would leave Amadeus's earnings approximately 8% below consensus for the quarter.
Sabre's downgrade reflects skepticism over its recent stock price rally, which Bernstein says is not matched by any changes in financial outlook.
"We also downgrade Sabre to Underperform, following a recent increase in the share price that we do not see as matched by any changes in financial outlook, while rising government bond yields continue to present challenges to finance costs over the medium-term," said Bernstein.
The analysts emphasize that airlines now offer more compelling investment opportunities. Bernstein prefers European carriers, citing strong yields and falling fuel prices.
Ryanair (LON:0RYA) is their top pick, expected to deliver "double-digit annual cash returns," while IAG (LON:ICAG) is favored for its position in markets like London and the North Atlantic, where capacity remains tight.
While Amadeus remains a "structural winner" in segments like Air IT and Hospitality, and its flagship Nevio product could drive future market share gains, Bernstein views its valuation at 18 times 2026 earnings as fully priced.
For air tech, Bernstein concludes, growth is tied to passenger volumes, making airlines the better play for yield leverage in the current market environment.