William Blair Downgrades Verra Mobility (VRRM) to Market Perform, 'Surprise Avis Customer Loss Is a Major Blow to Profitability'
William Blair analyst Louie DiPalma downgraded Verra Mobility (NASDAQ: VRRM) from Outperform to Market Perform.
The analyst comments "We are lowering our rating on transportation infrastructure service provider Verra Mobility shares to Market Perform following the company’s disclosure that it lost rental car tolling customer Avis (CAR $166.52). This is a major blow because the rental car tolling business is highly profitable with a 65% EBITDA margin. The loss of Avis is expected to result in a $123 million annualized reduction to segment profitability, which represents approximately 30% of our estimated 2026 EBITDA. There will be some cost cuts that are implemented in response to the Avis loss that will mitigate the impact, but those cuts have not been quantified. Stock thoughts and risks to our downgrade: In our view, shares will be range-bound over the next 12 months. There is an upside scenario in which Avis comes back to Verra. However, there is also a scenario in which Verra’s other rental car partners either in-source or go to a competitor. In our view, there is the potential that Avis encounters challenges with switching to a different solution, and returns to Verra. This would cause shares to rebound materially.:
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Shares of Verra Mobility closed at $13.08 yesterday.