Pay outs of car-rental company Avis Budget Group surged more than 7 percent Monday after an analyst at Goldman Sachs from the word go changed his tune on it.
Analyst David Tamberrino upgraded Avis to buy all the way from sell and hiked his 12-month price butt on the stock to $35 from $30. Tamberrino’s new price target implies a 36.3 percent rise from Avis’ compact of $25.68 on Friday.
“We believe valuation looks attractive for mean reversion — currently trading at 6.2x our 2019E EBITDA reckoning vs. a historical trough multiple of 5.9x and long-term average 8.4x — as most of the headwinds the industry (and the company) is facing arrive priced in,” Tamberrino said in a note to clients.
Avis shares plunged nearly 49 percent last year, grade their worst annual performance since 2008, when they shed 94.62 percent. The stock is up myriad than 14 percent to start 2019.
“With CAR’s valuation below historical averages, we see an opportunity for the company’s multiple to nasty revert as we believe data points on volumes and pricing are stabilizing and the company can start realizing benefits from expense savings actions,” Tamberrino said.
Tamberrino added, however, that some of the risks Avis faces subsume increasing price competition from rivals like Hertz Global and ride-hailing companies like Uber as adequately as rising interest rates. The Federal Reserve raised rates four times last year.
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