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Investing.com -- Bank of America cut its rating for Avis Budget (NASDAQ:CAR) Group to Underperform from Buy in a note on Wednesday, warning that the company’s fundamentals and industry backdrop do not justify its current share price.
“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 note to clients. The firm lowered its price target to $113 for the stock, down from $120.
BofA flagged “pricing and demand pressures in the U.S. which negatively affects CAR’s earnings power in 2H25/2026.” The analysts said a survey the bank conducted shows fewer consumers plan to increase travel spending in the next three months compared to 2024.
“This should translate into a soft pricing environment,” BofA wrote, adding that tariffs could further weaken demand in the second half.
The bank acknowledged recent initiatives such as Avis First, aimed at the premium segment, and a fleet management partnership with Waymo. “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 remains a swing factor. “Although this is a potential tailwind, we believe that the effect may not be as large as thought,” BofA said, noting the current environment differs from the Covid period.
The bank cut its 2025 and 2026 EBITDA estimates to $0.9 billion and $1.03 billion, respectively, and lowered its valuation multiple. “We cut our PO to $113 from $120, valued on 7.5x EV/EBITDA 2026,” the analysts wrote