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Avis Budget Soars as BofA Upgrades Price Target by 39% By


© Reuters.

By Dhirendra Tripathi – Avis Budget stock (NASDAQ:) climbed 10% Thursday as analysts at BofA (NYSE:) raised their target by 39% to $125 from $90 earlier.

The brokerage called the stock a buy, citing continued existence of factors that led to the company “over-earning” in 2021 next year as well. The target price is now around 25% more than the stock’s current level.

John Murphy analyst, believes there are several factors that contribute to Murphy’s optimism. These include limited incoming vehicle supplies, tight average fleet, increased revenue per day, the continual supply-demand imbalance and moderated per-unit cost due to high used vehicle pricing.

He believes the current stock price doesn’t fully capture the benefits that would arise as a result of the ongoing efforts at the company. He said that this should lead to upward revisions of 2022+ estimates.

A severe shortage of chip technology has led to reduced vehicle output by almost all major automakers in the world. As a result, consumers have turned to second-hand vehicles retailers, taxi aggregators and rental cars companies as a means to travel.

Avis’ June-quarter result was the best in its history as revenue more than tripled to $2.4 billion and adjusted earnings more than quadrupled from 2019-level to $624 million.  

To bring its total year-to-date to over $6 billion, Avis purchased more fleet than $3 billion in the second quarter.

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