On Wednesday, Morgan Stanley made an adjustment to its price target for Avis Budget (NASDAQ:CAR) Group shares, listed on NASDAQ:CAR, reducing the target to $187.00 from the previous $190.00.
Despite this change, the firm maintained an Overweight rating on the stock. The adjustment follows an evaluation of the company's projected earnings before interest, taxes, depreciation, and amortization (EBITDA).
The analyst from Morgan Stanley noted that the adjusted corporate EBITDA margin in their fiscal year 2024 forecast is approximately 600 basis points higher than the pre-pandemic level in 2019. This is despite Avis Budget Group's revenue growth of 30%, continuous operational improvements, and the positive impact of significant improvements in global travel trends.
The new price target suggests a multiple of 8.9 times the 2025 enterprise value to EBITDA based on the fiscal year 2024 net debt. The analyst acknowledged that rental car companies can experience periods of high earnings volatility but regards Avis Budget Group as a superior operator and capital allocator within the industry.
Morgan Stanley's stance on the car rental sector remains firm, with the belief that it holds growing strategic value. This is particularly highlighted in terms of its downstream fulfillment infrastructure, which the analyst believes will continue to be significant for Avis Budget Group's operations.
InvestingPro Insights
Following Morgan Stanley's revised price target for Avis Budget Group (NASDAQ:CAR), current InvestingPro data provides a deeper financial perspective on the company. Avis Budget Group's market capitalization stands at $4.38 billion, with a strikingly low P/E ratio of 2.9 as of the last twelve months ending Q4 2023. This valuation is further accentuated when considering the adjusted P/E ratio, which is even lower at 2.65.
InvestingPro Tips suggest that while Avis Budget Group operates with a significant debt burden, management has been proactive in share repurchase, indicating confidence in the company's financial health. Additionally, the company's stock price has experienced considerable volatility, with a price that has fallen significantly over the last three months. This could present an opportunity for investors looking for undervalued stocks, as analysts predict the company will be profitable this year, and it has been profitable over the last twelve months.
For investors interested in a more comprehensive analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/CAR. Moreover, to access these insights, users can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 13 more InvestingPro Tips to explore, savvy investors can gain a well-rounded view of Avis Budget Group's financial landscape.
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