CAR - Avis Budget rallies after J.P. Morgan turns bullish on growth potential

Avis Budget Group ( NASDAQ: CAR ) pushed higher in early trading on Monday after J.P. Morgan issued an upgrade on the car rental stock to an Overweight rating from Neutral.

Analyst Rajat Gupta and team call Avis Budget ( CAR )  an attractive investment opportunity with the company well-positioned to leverage growth in the industry.

Looking ahead, tailwinds seen for the Avis Budget business, including an expectation of increased demand for rental cars as economies reopen from COVID-19-related restrictions on travel and revenue per day to remain elevated due to the limited supply of rental cars. Avis management was also noted to have aggressively cut costs during the pandemic to help the company become leaner and allow its cost structure to become more flexible. Avis' balance sheet is observed to be historically strong, with lower cost of fleet financing, declining leverage, and no near-term maturities. J.P. Morgan also expects strong EBITDA and free cash flow to allow for allocation of capital toward shareholder friendly activities.

J.P. Morgan established a December 2023 price target of $231. The firm set the target multiple above the historical average, reflecting partly structural increase in margin on greater perceived industry pricing power and further bolstering of financial condition.

Shares of CAR shot up 3.50% in premarket trading to $195.88.

The Seeking Alpha Quant Rating on CAR is flashing Buy.

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