Goldman Sachs analyst Lizzie Dove upgraded Avis Budget Group, Inc (NASDAQ:CAR) shares to Neutral from Sell, raising the forecast to $130 from $118.

According to the analyst, Avis Budget will fare better than its peers given its lean cost base, lower exposure to EVs and slightly younger fleet mix.

Though estimates for the year have troughed, the analyst still saw some downside to 2025 estimates, pending further proof points on the stabilization of pricing.

Dove also projected the gap between used and new vehicle pricing to narrow in 2025, given lower supply and new vehicle prices trending lower, which should also mean a slower rate of DPU growth (i.e., less of a headwind) for Avis Budget.

The company has $4.1 billion of vehicle debt which will mature this year, and another $6.7 billion which will mature in 2025.

As such, the analyst saw ~$200 million interest expense pressure in 2024, and ~$75 million in 2025 as the company refinances at higher rates.

Avis had a ~30% increase in pricing since 2019, and while the analyst believed this strength to decelerate, the ability to sustain a level of pricing growth above historical averages could create additional tailwinds to Avis's earnings.

In addition, a more benign competitive environment may provide upside and further cost efficiencies.

The analyst expects the company's FY25 revenue to be $12.025 billion.

According to Benzinga Pro, Avis Budget Group stock lost more than 33% in the past year. Investors can gain exposure to the stock via SPDR S&P Transportation ETF (NYSE:XTN) and Royce Quant Small-Cap Quality Value ETF (NASDAQ:SQLV).

CAR Price Action: Avis Budget Group shares are trading higher by 1.88% to $123.39 at last check Thursday.

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