Shares of rental car operators Avis Budget Group (CAR) and Hertz Global Holdings (HTZ) are falling after a Goldman analyst downgraded Avis citing waning demand and increased pressure on the company’s outlook. DOWNGRADE: Goldman analyst David Tamberrino downgraded Avis Budget to Sell from Neutral on Wednesday and lowered his price target to $33 from $37. The analyst believes transitory benefits from Hurricane recovery demand are waning and headwinds from reduced residual values and higher interest rates will limit growth in corporate EBITDA. Avis’ earnings outlook will also be pressured by continued competition from Enterprise and ride-share services in on-airport business as well as increased selling, general and administrative expenses and higher advertising costs, Tamberrino said. He believes Avis’ guidance will disappoint and expects multiple compression as data points on residual values and pricing reverse. In addition, Tamberrino reiterated a Sell rating on Hertz and lowered his price target to $13 from $15 saying he believes the company will see continued residual value pressure. PRICE ACTION: Avis Budget Group dropped 4.4%, or $1.77, to $38.35 in early afternoon trading, while Hertz was down 1.1%, or 20c, to $18.40.
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