Bank of America downgraded Avis Budget Group (NASDAQ:CAR) from Buy to Underperform on Wednesday, signaling that the company’s fundamentals and the broader industry environment do not support its current valuation.
“We think that CAR fundamentals and the macro environment don’t support the current stock price, which significantly outperformed the market in June,” BofA analysts wrote in a client note. The firm also cut its price target for the stock to $113, down from $120.
The bank highlighted concerns over “pricing and demand pressures in the U.S. which negatively affects CAR’s earnings power in 2H25/2026.” BofA noted that its survey indicates fewer consumers plan to increase travel spending in the coming three months compared to 2024.
“This should translate into a soft pricing environment,” the analysts said, adding that tariffs could further dampen demand in the second half of the year.
While acknowledging recent initiatives such as the premium-focused Avis First program and a fleet management partnership with Waymo, BofA cautioned that their near-term impact on earnings is likely limited. “We see these developments as positives, and they speak to the fact that CAR is a strong operator. However, we don’t expect these initiatives to have a significant effect on earnings in the near term,” the analysts said.
Vehicle depreciation also remains a variable factor. “Although this is a potential tailwind, we believe that the effect may not be as large as thought,” BofA added, noting that the current market differs from the conditions seen during the Covid period.
The bank lowered its EBITDA projections for 2025 and 2026 to $0.9 billion and $1.03 billion, respectively, and revised down its valuation multiple. “We cut our PO to $113 from $120, valued on 7.5x EV/EBITDA 2026,” the analysts wrote.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.