3 Reasons To Sell Avis Budget Group

Avis Budget Group Inc.’s CAR stock has climbed more than 62 percent in the past month. Investors seem to be either assigning more value in the company’s nearer-term earnings than its earnings in outer-years, or expecting higher normalized EBITDA, according to Morgan Stanley.

The Avis Budget Group Analyst: Billy Kovanis downgraded the rating for Avis Budget Group from Equal-Weight to Underweight, while raising the price target from $85 to $110.

The Avis Budget Group Thesis: There are “better risk-adjusted opportunities for auto mobility and/or travel exposure in other names within the MS coverage,” Kovanis said in the downgrade note.

The analyst gave three main reasons for the downgrade:

• “We are fading peak cyclical earnings and our normalized 2023 earnings forecast of $1.2bn is lower than what the market appears to be implying at $1.5bn,” Kovanis wrote.
• The risk reward seems “tilted to the downside,” he added.
• Although there are long-term opportunities with shared mobility, this is accounted for “in our Bull Case (not the Base Case),” the analyst wrote.

CAR Price Action: Shares of Avis Budget Group had declined by 5.69% to $141.34 at the time of publication Thursday.