Shares of car rental companies Hertz (HTZ) and Avis Budget Group (CAR) surged by more than 20% in a single trading session last week. These gains were attributed to President Donald Trump’s proposed 25% tariff on imported vehicles and car parts, which could benefit the rental car industry.
According to Wall Street, higher vehicle prices from tariffs might push consumers toward renting rather than buying cars. A short squeeze likely amplified the rally, as both companies had significant short positions — 13% for Avis and 14.5% for Hertz — before the surge. According to a Reuters report, this comes after both stocks had lost nearly half their value over the past year.
Meanwhile, auto parts retailers, including O’Reilly (ORLY), AutoZone (AZO), and Advance Auto Parts (AAP), also gained as JPMorgan analysts predict consumers would keep their vehicles longer, increasing repair frequency and benefiting the aftermarket sector.
In contrast, car manufacturers with global supply chains like General Motors (GM) saw their shares drop sharply on tariff concerns.
Is CAR Stock a Good Buy Right Now?
Valued at a market cap of $2.6 billion, Avis Budget Group is among the largest car rental companies globally. In Q4 2024, it reported an adjusted EBITDA loss of $101 million. Avis also reported a $2.5 billion non-cash impairment charge related to an accelerated fleet rotation strategy. Despite the setback, Avis forecasts adjusted EBITDA of at least $1 billion in 2025.
Avis disclosed plans to replace higher-priced model year 2023 and 2024 vehicles with more affordable 2025 models. This strategy aims to normalize fleet costs and improve operational efficiency. CEO Joseph Ferraro explained that the opportunity to acquire new cars at pre-pandemic price levels prompted the shift in strategy.
“We’re not happy taking this impairment, but accelerating our fleet rotation now allows us to position ourselves to better manage our fleet costs and maximize our earnings this year and the years to come,” Ferraro stated.
Fleet costs are expected to remain elevated at approximately $400 per vehicle per month in Q1 before declining to below $350 in Q2 and trending toward $300 by year-end. This normalization of costs, anticipated higher vehicle utilization, and reduced maintenance expenses underpins management’s confidence in their outlook for 2025.
Avis also announced a leadership transition. Ferraro will step down on June 30 after 45 years with the company, including five as CEO. Brian Choi, the company’s chief transformation officer, will take over the chief executive role.
What Is the Target Price for Avis Budget Stock?
Avis expects to report an EBITDA loss of $100 million due to elevated fleet costs and calendar shifts. However, management explained that improved fleet costs, operational efficiencies, and strong travel demand would drive the company toward its full-year earnings target.
Analysts tracking the stock expect Avis Budget to report a free cash flow of $885 million in 2025, compared to an outflow of $514 million in 2024. So, priced at less than 3x forward FCF, CAR stock is relatively cheap.
Out of the nine analysts covering CAR stock, four recommend “Strong Buy,” one recommends “Moderate Buy,” and four recommend “Hold”. The average target price for Avis Budget stock is $113.50, indicating upside potential of 50% from current levels.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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