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Bear of the Day: Avis Budget Group (CAR)

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Avis Budget Group (CAR) is a Zacks Rank #5 (Strong Sell) that provides car and truck rentals, car sharing, and ancillary products and services to businesses and consumers.

The company is a leading global provider of mobility solutions through its three most recognized brands — Avis, Budget, and Zipcar.

The stock took a tumble after an earnings report and took out 2023 lows. Investors should avoid buying this dip until the earnings momentum turns.  

About the Company

Avis Budget was founded in 1946 and is headquartered in Parsippany, NJ. The company has approximately 24,500 employees working across 10,250 rental locations in over 180 countries. 

CAR isvalued at $4.4 billion and has a Forward PE of 6. The stock holds Zacks Style Scores of “A” in Value, and “B” in both Momentum and Growth. The company pays no dividend.  

Q4 Earnings

Adjusted earnings of $7.1 per share beat the consensus estimate by 62.8% but this was down 32.1% year over year. Total revenues of $2.76 billion missed the consensus estimate by 1.3%, which was slightly below last year's figures.

The stock was sold on the Q1 EBITDA miss and the company’s bearish expectations for higher depreciation expense in 2024.

The company is looking to aggressively de-fleet to improve utilization levels, but used vehicle values have dropped. This is going to make for a tough 2024 for investors.

Since earnings, the stock has fallen from the $170 mark to $115, a drop of 30%.

Earnings Estimates

Earnings estimates have plunged since earnings as analysts try to factor in the depreciation factor.

Over the last 7 days, the current quarter estimates have fallen from $0.90 to a negative $0.67.  For the current year, estimates have dropped from $24.74 to $21.67, a drop of 12%.

Next year things do get better, with estimates dropping from $22.88 to $21.95.

Technical Take

Avis went wild during the “Meme Stock” days, but fell off a cliff like the rest of the hot names from 2021. Since then, the stock has traded sideways in a 100-point range.

The recent move lower takes out the lows of that range. So anybody that bought over the last two years is out of the money. This likely takes some time to digest and investors that are interested in this name should wait for lower prices.

In Summary

The one thing CAR has working for it is a very low PE at 6. This will bring in some buyers, but there is no rush to get into this name as it is a 2025 business due to the depreciation factor.

For those interested in the logistics space, a better option might be Matson (MATX - Free Report) . The stock is a Zacks Rank #1 (Strong Buy) that is trading near all-time highs.    

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