On Wednesday, Deutsche Bank adjusted its outlook on Avis Budget Group (NASDAQ:CAR) shares, reducing the price target from the previous $162.00 to $155.00, yet reaffirmed a Buy rating on the company's stock. The revision comes amid a backdrop of heightened debate over the car rental company's stock performance as it approaches its second-quarter earnings report.
The analyst noted that Avis Budget Group has become a contentious stock, particularly in recent weeks, as generalist investors have adopted a more bearish view. This sentiment is reflected in the approximately 20% of Avis Budget's float currently sold short.
The shift in investor stance is attributed to challenges in initiating or maintaining short positions in competitor Hertz's stock and renewed concerns over the trajectory of used car prices.
Despite these headwinds, the analyst suggests that the negative thesis regarding used car price trends may lose relevance. This expectation is based on upcoming comparisons with the Manheim Rental Risk index, which are set to become significantly more favorable. The index's June figures are 550 basis points more favorable than May's, and July's are expected to be 1,080 basis points more accommodating.
The report further elaborates on the potential for positive surprises from the Manheim data, which could act as a catalyst for Avis Budget Group's stock. This data is particularly relevant as it could influence investor perception and the stock's subsequent performance.
The analyst's comments and the price target adjustment reflect a cautious but optimistic outlook for Avis Budget Group as it navigates market conditions and investor sentiment ahead of its upcoming earnings release.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.