Avis Budget Group (NASDAQ:CAR) was lifted to Buy from Hold at Deutsche Bank on Wednesday, with analysts raising the firm's price target on the stock to $263 from $239 per share.
CAR shares have jumped more than 4% premarket following the Deutsche Bank note.
The analysts wrote that the stock has been "left behind without cause," and the upgrade is primarily focused on the company's valuation.
"We also see a potential catalyst in the form of a likely return to share repurchases in the back half of the year," they wrote. "CAR has meaningfully underperformed comparable travel and leisure sub-sectors on a YTD basis (to the tune of 2,400bps on average), and we believe the stock could be appealing to investors seeking to buy reasonably priced laggards as the S&P 500 sits near a 9-month high."
"Despite the relative underperformance, CAR's forward year EV/EBITDA multiple is, on average, nearly four turns lower than those of its peers in the comparable groups and is 1.5 turns below its own long-term historical average."
Overall, Deutsche Bank believes there is too much negativity embedded in CAR's near- and medium-term expectations regarding the direction of rental car pricing and used car values.