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. Its biggest coup was an expanded commercial deal with Air Canada.

But Amadeus has not enjoyed an above-average boom in such deals. Instead, many travel companies are choosing to build technology on their own.

Lufthansa Group, British Airways parent International Airlines Group and Air France-KLM have all recently said they plan to increase the share of technological development that they do in-house instead of outsourcing to companies like Amadeus, as our earlier coverage showed.

Amadeus competes with Sabre, Travelport, TravelSky, and others for business with airlines. Stumbles and hiccups by those rivals, partly due to their relative underinvestment in research and development, have made Amadeus look strong in comparison.

While Amadeus shines relative to those peers in profitability, the travel technology sector risks flat-lining in the early 2020s unless it coaxes more companies to spend more on its services.

2. Unfounded Optimism?

In the summer of 2015, Lufthansa became the first airline to say it would impose a charge on tickets not booked directly through its websites. Amadeus said no airline would follow. It has since been proved wrong.

In April,  Air France-KLM is expected to add its own surcharge, following the path taken by Lufthansa and International Airlines Group. By then about 20 percent of the airplane tickets booked through Amadeus — or about 15 percent of Amadeus’s sales — would be subject to the new fees.

These moves have not hurt Amadeus’s financials so far.

Given that the rebel airlines are still slow in persuading customers to book directly, Amadeus has actually increased the volume of commission it has been charging the carriers. The reason is that Amadeus charges a higher commission rate on the tickets that continue to be processed through its systems as a kind of retaliation.

In other words, its fourth-quarter numbers may reflect a rosy temporary boost to the bottom line.

3. Technical Mistakes

Amadeus’s biggest story of 2017 was moving Southwest Airlines, one of the largest U.S. carriers, away from a reservation system created by its rival Sabre to its own.

But the project didn’t go as seamlessly as predicted. Southwest suffered five outages. In January, Southwest President Tom Nealon said in an interview that, while the problems weren’t widespread or a crisis, “it’s a hassle and it’s frustrating.”

Amadeus wanted a good reference from Southwest, its first major U.S. airline reservations system customer, as it approaches other customers to sell its services. A bumpy implementation may take the shine off.

4. New Businesses Are Still Too New

In 2013, Amadeus touted that it would diversify its business beyond its best-known lines of offering distribution, reservation software, and IT services to airlines. CEO Luis Maroto said in an interview in May that diversification was still a goal of his company.

But in Wednesday’s earnings report, the company once again declined to break out the financial details of its new business lines in offering software services for hotel reservations, payments, rental car, and other travel sectors.

That’s because the growth remains sluggish.

The company’s brightest new prospect is its hospitality services division. But other than signing Premier Inn last fall, the company has been slow to have major wins.

In November, the division’s CEO Lee Horgan, who had played a pivotal role in the development of Amadeus’ hospitality business since the late 2013 acquisition of the services provider Newmarket that he had run for years, left the company “to pursue new opportunities.”

Hazem Hussein, previously Head of Airlines in Asia-Pacific, Russia, Commonwealth of Independent States, and Turkey, is the new the head of Amadeus Hospitality. But it may be unclear to some critics how his airline experience relates.

Amadeus is intent on using the playbook it uses to sell enterprise products to airlines in its sales to hotel chains, too. But hotels are much less of a commodified product and their needs differ in many ways. Is the company approaching the opportunity in the right way, or will it be wrong-footed by hospitality focused rivals like Oracle?

5. The Growth in Direct Bookings

Airlines have been eager to encourage customers to book directly on their websites and apps, which often sidesteps the most profitable distribution services of companies like Amadeus — even if airlines still use some other, less profitable software from those companies.

On Wednesday, CEO Maroto said that “the level of disintermediation” in 2017 had not had a net negative impact on the company and that he expected that trend to be stable in 2018.

The company’s executives suggest that the minimal impact is due to Amadeus being too nimble to be tripped up.

But other explanations for the apparent lack of financial pain from the direct booking movement may be more relevant.

Amadeus partly offset the decline in profitability through geographical expansion. It stepped up its share of the travel agency distribution business in emerging markets, such as Latin America and Asia-Pacific.

Some of this was stealing share from rivals rather than growing the market, which may be a path with diminishing returns over time.

Amadeus may have gathered much of the easy gains in emerging markets already. Sustaining growth in emerging markets may become costlier over time as the company needs to use more incentives to lure in new agencies and airlines.

6. Uncorrected Optimism

In a related constraint, many of the airlines that remain to be won by Amadeus in contracts are either low-cost carriers whose lean business models don’t necessarily require Amadeus’s highest-priced services or are Chinese companies that prefer the home technology player TravelSky.

In the established markets of the U.S. and Europe, some airlines complain that Amadeus and its peers do not do a good enough job of helping them upsell customers to justify the cost of their tools.

IdeaWorksCompany, a consultancy, estimates airline a la carte revenue at $57 billion worldwide for 2017. Of that, the revenue from checked baggage accounted for an estimated $23.6 billion in sales.

Amadeus and its peers are not getting nearly enough share of those sales as they should, according to critics.

7. Where’s the Multi-Modal?

Using a single card or mobile phone for multiple forms of transport is likely to be the way travel will be bought and managed in the future.

But Amadeus seems ill-prepared for that future.

It has almost no inventory beyond flights and hotels, such as alternative accommodation, car hire, and rail.

Last year it suffered a blow when Expedia bought SilverRail Technologies, a transport technology company that has outmaneuvered Amadeus in the sales of enterprise software services to rail companies in Europe.

Beyond rail, Amadeus and its peers may also be threatened by new consumer behaviors.

Today consumers in many markets can comparison shop for airfares via Google and book directly with airlines without the use of Amadeus’s most-profitable services. The U.S. airline JetBlue even lets customers buy their tickets using ApplePay as a payment method and their iPhones as boarding passes, circumventing the need for many third-party services provided by Amadeus and its peers.

8. Payments Due

“No plastic money anymore” was one of the lines in the 1985 pop music hit Rock Me Amadeus, and the rise of virtual payments is a key trend in corporate and consumer travel. Yet Amadeus has not had a payments services success story to match rival Travelport’s eNett or the services of other providers, such as Vantiv’s Worldpay.

Managing the complexity of cross-border and mobile payments is a key challenge for travel companies of all kinds. Amadeus is not yet punching at its weight in providing services to this sector.

The company may need to make an acquisition here to fill a gap in its portfolio, but investor euphoria worldwide has driven up the price of many potential targets.

9. Rock Me Amadeus

As a stock investment, Amadeus has a seven-year track record of delivering above-average returns relative to its peers and to many major airlines.

Yet investors are growing cautious. Thirty analysts cover Amadeus and the median view of the most prominent ones is “hold” instead of buy.

Meanwhile, industry watchers are eager to find out how many airlines, hotel chains, and other travel companies will think of the word “buy” when they think of Amadeus’s services in the coming years. It is a big unknown.

Photo Credit: Is that a rising sun or a setting sun over Amadeus in this photo of the company's Madrid headquarters? It depends on how optimistic you are about its future. Amadeus