Whether on vacation, on a business trip, or for a jaunt in between, rental cars are currently selling like hot cakes. After the Corona slump in 2020, the curve is pointing steeply upwards. According to estimates, global car rental sales will break the EUR 100 billion mark for the first time this year. According to data specialist Statista, the market will then grow to just under EUR 114 billion by 2027, corresponding to an expected annual growth rate of just under 3%.
According to market researcher Morder Intelligence, growth drivers include an increase in business travel and tourism, as well as the greater availability of top-of-the-range luxury and economy vehicles. In addition, the increasing acceptance of electric cars is supporting demand for rental cars. The U.S. group Avis Budget has long recognized the signs of the times and even introduced its own booking group for such vehicles in Germany a few days ago. A pool of 14 e-models is offered.
With more than 7,000 locations in 179 countries, Avis is one of the largest car rental companies in the world. The U.S. is the company's most important region, accounting for 78.8% of sales. The fact that Avis, which is headquartered in Parsippany in the US state of New Jersey, has an attractive fleet is best reflected in its books. Revenue grew 29% year-over-year in 2022 and 31% over pre-Corona year 2019 to USD 12.0 billion. As a result, Avis grew significantly faster than the market. On the earnings side, the company set new records on both an EBITDA and net basis.
The start to the new year has also been successful. Supported by strong demand and higher prices, sales increased by 5.1% to USD 2.56 billion, beating consensus estimates by 2.2%. Adjusted earnings per share of USD 7.72 beat expectations by more than 100%. And Avis set another record, with rental transactions reaching the highest level in a first quarter in the company's 77-year history. "Despite this growth in activity, we managed to improve utilization and tightly control costs to continue to deliver strong earnings," CEO Joe Ferraro was pleased to say in presenting the interim report.
On the capital market, on the other hand, the shares with the meaningful stock exchange abbreviation "CAR" are presenting themselves less strongly. For more than a year, Avis Budget Group's share price has been making no headway on the bottom line. The S&P 400 MidCap member recently jetted up and down in a wide range between USD 150 and USD 250 and is currently hovering around the USD 200 mark. The stock has also significantly underperformed comparable stocks in the travel and leisure sectors since the beginning of the year. According to Deutsche Bank analysts, however, the stock was "left behind for no reason." Due to the favorable valuation, the experts recently upgraded Avis from "Hold" to "Buy" and raised the price target from USD 239 to USD 263. This puts Deutsche Bank exactly in line with the consensus price forecast of 5 analyst firms, whose fair value estimates range from USD 327 to USD 182.
In order to achieve attractive returns with the new Softcallable Barrier Reverse Convertibles on Avis Budget Group, the share may even be oriented towards the lowest price target of the analysts. The two single products, which are offered in CHF and USD, each have a risk buffer of a comfortable 51%. If the barrier remains intact during the maximum term of 18 months, the maximum yield will be achieved. The coupons amount to an above-average 14.00% p.a. for the CHF variant and even 17.00% p.a. for the USD product. After half a year at the earliest, the issuer has the right to terminate the Barrier Reverse Convertibles prematurely. This also applies to the new multi-BRC on the two car rental specialists Avis and Uber. The CHF-denominated product also has a low barrier of 49% of the initial level, and the coupon amounts to an attractive 17.00% p.a.
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