Avis Budget Stock Downgraded to Underperform by Bank of America Amid Weak Demand and Pricing Pressures

Avis Budget Group's stock fell after Bank of America analyst Federico Merendi downgraded the stock from Buy to Underperform and cut his price target from $120 to $113. Merendi warned that the US rental car industry faces pricing and demand pressures that will weigh on Avis Budget's earnings in the second half of 2025 and into 2026. He noted that Bank of America's survey data shows fewer consumers expect to spend more on travel over the next three months compared to last year, pointing to a softer pricing environment.

Avis Budget Group (NASDAQ: CAR) has seen its stock fall after Bank of America analyst Federico Merendi downgraded the stock from Buy to Underperform and reduced his price target from $120 to $113. The downgrade comes amidst concerns about pricing and demand pressures in the U.S. rental car industry, which Merendi believes will weigh on Avis Budget's earnings in the second half of 2025 and into 2026 [1].

Merendi cited data from Bank of America's survey, which shows fewer consumers plan to increase travel spending over the next three months compared to 2024. This trend is expected to create a softer pricing environment and potentially weaken demand for rental cars [1]. Additionally, Merendi pointed out that tariffs could further exacerbate these issues.

While acknowledging recent initiatives such as the Avis First program and a fleet management partnership with Waymo, Merendi noted that these developments are unlikely to significantly impact near-term earnings. He revised his EBITDA estimates to $0.9 billion for 2025 and $1.03 billion for 2026, down from prior forecasts of $0.95 billion and $1.2 billion, respectively [1].

The analyst expects 2025 sales of $8.09 billion and EPS of $9.43. Despite these projections, Merendi believes that the current earnings environment has stabilized enough to no longer rely on normalized multiples. He now values the stock at 7.5 times 2026 EV/EBITDA [1].

Avis Budget Group's stock is down 4.83% at $149.06 at the time of publication on Wednesday [2]. The company reported a substantial miss on earnings per share in Q2 2025, with EPS coming in at $0.10 compared to the $2.21 analyst estimate. Revenue was essentially flat compared to Q2 2024 but slightly beat consensus, reaching $3,039 million (GAAP) [3].

References:
[1] https://finance.yahoo.com/news/avis-budget-double-downgraded-fundamentals-133239775.html
[2] https://www.benzinga.com/analyst-stock-ratings/downgrades/25/08/47242044/avis-budget-stock-falls-as-bank-of-america-warns-weak-demand-pricing-could-hurt-earnings
[3] https://www.aol.com/finance/avis-car-q2-eps-drops-200615333.html