Benzinga | Oct 14, 2021 11:22AM EDT

3 Reasons To Sell Avis Budget Group

Avis Budget Group Inc.'s (NASDAQ:CAR) stock has climbed more than 62 percent in the past month. Investors seem to be either assigning more value in the company's nearer-term earnings than its earnings in outer-years, or expecting higher normalized EBITDA, according to Morgan Stanley.

The Avis Budget Group Analyst: Billy Kovanis downgraded the rating for Avis Budget Group from Equal-Weight to Underweight, while raising the price target from $85 to $110.

The Avis Budget Group Thesis: There are "better risk-adjusted opportunities for auto mobility and/or travel exposure in other names within the MS coverage," Kovanis said in the downgrade note.

The analyst gave three main reasons for the downgrade:

* "We are fading peak cyclical earnings and our normalized 2023 earnings forecast of $1.2bn is lower than what the market appears to be implying at $1.5bn," Kovanis wrote.

* The risk reward seems "tilted to the downside," he added.

* Although there are long-term opportunities with shared mobility, this is accounted for "in our Bull Case (not the Base Case)," the analyst wrote.

CAR Price Action: Shares of Avis Budget Group had declined by 5.69% to $141.34 at the time of publication Thursday.