Susquehanna cuts Avis Budget stock price target on EBITDA concerns

Susquehanna cut its Avis Budget price target to $125 from $140 and maintained a Neutral rating; the target is just above the stock’s $119.81 price after a 35% six-month decline. The firm cited gradual progress and three consecutive quarters of higher revenue per day, but said more detail is needed on the algorithm underpinning approximately $1 billion in targeted EBITDA versus current EBITDA of $691 million. Separately, Q3 2026 adjusted EPS of $5.15 missed the $8.11 consensus by 36.5%, while revenue of $3.44 billion modestly beat the $3.42 billion estimate.

Analysis

The key issue is conversion, not demand: revenue per day gains have not prevented a large earnings miss, so pricing is not yet demonstrating reliable flow-through to EBITDA. Fleet depreciation, utilization and operating costs are plausible bridges to test, but the article does not provide enough detail to identify which is driving the gap. A sideways used-vehicle market reduces the near-term tailwind from rising disposal values; a turn lower would pressure residual values and raise the cost of fleet replacement, compounding margin risk. Conversely, disciplined fleet sizing and debt reduction could improve cash generation even before the proposed EBITDA trajectory is achieved.

Over the next 1–3 months, focus on management’s quantified bridge from $691 million EBITDA toward approximately $1 billion: required revenue-per-day, fleet, cost and depreciation assumptions, plus timing. Analyst estimate cuts and the earnings shortfall make execution risk more salient than the modest revenue beat. Over 6–18 months, better premium mix or operating tools could help, but the claimed benefit needs measurable results; do not capitalize it ahead of evidence. The 35% six-month decline may already reflect substantial skepticism, so chasing a short risks a sharp rebound if fleet discipline and cash conversion improve. The thesis weakens if EBITDA and free cash flow improve alongside stable fleet costs; it strengthens if earnings continue missing despite revenue resilience.

Key Decisions for Investors

• Keep CAR underweight rather than add on the price-target cut alone; the cited target is close to the current price and offers little apparent cushion against another operating miss.
• Wait for the next results or guidance update before initiating a directional trade. Require a transparent EBITDA bridge and evidence that revenue-per-day gains are converting into earnings and cash.
• For an existing CAR position, consider a relative-value hedge by pairing a reduced CAR exposure with a diversified travel/leisure basket; this expresses concern about fleet economics without making a broad bet against travel demand.
• Reassess the cautious thesis if EBITDA and free cash flow improve while fleet depreciation remains controlled. Escalate concern if another earnings miss or downward guidance revision occurs despite stable or improving revenue.