Morgan Stanley upgraded car rental giant Avis Budget Group with a lofty new price target early Tuesday. CAR stock leapt Tuesday following the news.
New Jersey-based Avis operates 10,000 car rental locations across 180 countries through its Avis and Budget brands, as well as the leading car-sharing network Zipcar.
Morgan Stanley upgraded CAR stock to an overweight rating from an equal weight rating early Tuesday. Avis Budget is able to extract more value per unit from its vehicles while running a larger fleet than its peers, analyst Adam Jonas wrote in a research note. He added Avis has a proven track record of fleet risk management and history of lower operating expenses as a percentage of sales. Jonas hoisted his price target on CAR stock to 230 from 182.
Average rental fleet increased to 620,833 as of Q1, up 4% from last year. The company's vehicle utilization rate stood at 68.4% in Q1, up one percentage point from last year. Avis Budget defines vehicle utilization as the number of days a vehicle was rented divided by the available rental days in a period.
Sales growth slowed the last seven quarters to a 5% gain to $2.56 billion for its Q1 earnings results in early May. Meanwhile, earnings decelerated the last four quarters, notching a 23% drop to $7.72 per share in the first quarter.
CAR Stock
Avis Budget shares jumped 9.7% Tuesday following the upgrade and surged 5% during premarket trading. CAR stock zoomed nearly 37% so far in 2023. It is shaping a possible base, the most recent in a series of side-by-side structures that have kept it locked in a fairly wide trading range since November 2021.
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