Avis Budget's (CAR) Outlook Weakens on Softening Demand and Pricing Risks, Says BofA

Avis Budget Group Inc. (NASDAQ:CAR) is one of the most shorted stocks right now. On August 20, Bank of America analyst Federico Merendi downgraded Avis Budget Group (NASDAQ:CAR) to Underperform from Buy and lowered his price target to $113 from $120. Merendi argued that neither the fundamentals nor the broader travel environment supports the stock’s recent outperformance, particularly after the rally seen in June.

The analyst cited softening U.S. demand and weaker pricing trends as headwinds for Avis Budget Group Inc.’s (NASDAQ:CAR) earnings through late 2025 and 2026. A recent BofA consumer survey indicated reduced intentions to increase travel spending, pointing to a more challenging backdrop for rental volumes and pricing. Tariffs could further weigh on demand in the second half of the year.

The analyst acknowledged that new initiatives, such as the Avis First premium program and a fleet management partnership with Waymo, could strengthen the business. However, he expects these to take time before making a material contribution to earnings. Vehicle depreciation could provide some relief, but not to the levels seen during the pandemic when resale values spiked.

Reflecting these dynamics, the analyst cut his 2025 and 2026 EBITDA forecasts for Avis Budget Group Inc. (NASDAQ:CAR) and reduced valuation assumptions.

Avis Budget Group Inc. (NASDAQ:CAR) operates the Avis, Budget, and Zipcar brands, offering car rental and mobility services to both leisure and business customers.

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Disclosure: None. This article is originally published at Insider Monkey.