Avis Budget Stock Falls As Bank of America Warns Weak Demand, Pricing Could Hurt Earnings

Avis Budget Group (CAR) shares declined following a BofA Securities downgrade from Buy to Underperform, with the price target cut to $113 from $120. Analyst Federico Merendi cited ongoing pricing and demand pressures within the U.S. rental car industry, driven by a softer macro backdrop and reduced consumer travel spending expectations, which are expected to weigh on earnings through 2026. Despite acknowledging long-term growth initiatives, BofA revised down its 2025 and 2026 EBITDA estimates, indicating that near-term headwinds from industry fundamentals are likely to persist.

Analysis

Avis Budget Group (CAR) is facing significant headwinds, as underscored by a BofA Securities downgrade from Buy to Underperform and a price target reduction to $113 from $120. The negative outlook is predicated on weakening industry fundamentals, specifically persistent pricing and demand pressures that are expected to weigh on earnings through the second half of 2025 and into 2026. This view is supported by Bank of America's survey data indicating a decline in consumer travel spending intentions. In response, the analyst has materially revised EBITDA estimates downward to $0.9 billion for 2025 and $1.03 billion for 2026. While the company's long-term strategic initiatives, such as the premium Avis First program and a partnership with Waymo, are acknowledged as positive, they are not expected to provide any near-term offset to the macroeconomic pressures. The downgrade has triggered an immediate market reaction, with shares falling 4.83% to $149.06, a level still significantly above the new price target.

Key Decisions for Investors

• Given the BofA downgrade and downwardly revised EBITDA estimates for 2025 and 2026, investors should re-evaluate any bullish thesis on CAR, as near-term earnings are projected to remain under significant pressure.
• Investors should note the considerable gap between the current stock price of $149.06 and the analyst's new price target of $113, which suggests substantial downside risk if the market's sentiment aligns with BofA's fundamental view.
• Monitor key leading indicators for the rental industry, such as consumer travel spending surveys and vehicle depreciation trends, as these are the primary drivers behind the pessimistic earnings outlook.
• Consider that while long-term growth initiatives like the Waymo partnership are viewed favorably, the analysis clearly states they are unlikely to mitigate the immediate headwinds, warranting a cautious stance on near-term performance.