Avis Budget (CAR) Gains on BofA Upgrade to Buy on Expected Upward Revisions to 2022+ Estimates

September 16, 2021 8:10 AM EDT
Get Alerts CAR Hot Sheet
Price: $173.06 +3.03%

Rating Summary:
    4 Buy, 5 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 8 | Down: 12 | New: 47
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BofA analyst upgraded shares of Avis Budget (NASDAQ: CAR) to Buy from Neutral and raised the price target to $125.00 per share from the prior $90.00.

Shares of the company are up 2.2% in pre-open Thursday.

“Our Buy rating on Avis reflects our view that many of the macro factors driving “over-earning” by the company in 2021 will likely persist well into 2022, specifically limited incoming vehicle supply and tight average fleet, elevated revenue per day from the ongoing supply/demand imbalance, and moderated per unit fleet cost from elevated used vehicle pricing. Combined with ongoing execution by the company, this should result in upward revisions to 2022+ estimates that do not appear appreciated by the stock,” Murphy said in a client note.

The analyst bases his new price target on an EV/EBITDA multiple of roughly 10x on the bank’s 2022 estimates.

“Our assumed 10x EV/EBITDA multiple is above its post-crisis average (2010+), but still within a broader trading range of 4-12x+. We believe this multiple is appropriate as the tenets of our investment thesis continue to manifest. We also believe a multiple within range balances both the near-term upside earnings trajectory (including revisions) in the post-COVID recovery, as well as outstanding challenges to the rental car business model, both near-term (COVID-19, HTZ bankruptcy, etc.) and longer-term (mobility services, etc.) that CAR will need to address,” the analyst adds.

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