Avis's stock gets ratings upgrade as demand for travel continues

By Claudia Assis

Rental-car industry is the 'proverbial tail of the dog' amid travel demand

Avis Budget Group Inc.'s stock got a ratings upgrade from analysts at Morgan Stanley, who said they moved to a "relatively more constructive view" of the rental-car industry amid ongoing heated demand for travel.

The analysts, led by Adam Jonas, raised their rating on Avis's (CAR) stock to the equivalent of buy from the equivalent of neutral and set a price target of $230, up from $200. The new price target represents an upside of about 5% over Thursday prices for Avis shares.

See also: Airlines are bracing for a busy summer travel season -- here's what to expect

Avis "has a history of being able to not only extract higher revenues, but also lower costs and subsequently higher margins from their operations vs [Hertz Global Holdings Inc.]," the analysts said.

They kept their rating on Hertz (HTZ) shares at the equivalent of hold.

The analysts said that their airline team continues to be bullish on travel for the second half of the year and that rental-car companies are "the proverbial 'tail of the dog' of the travel industry." Broader demand plays a key role in the industry's demand curves, the analysts said.

Shares of Avis have gained 35% so far this year, while Hertz's shares have risen 15%. That compares with gains of about 14% for the S&P 500 in the same period.

-Claudia Assis

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06-22-23 1307ET

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