(Bloomberg) -- Shares of Avis Budget Group Inc. posted their best month in more than 12 years thanks to strong demand for rental vehicles, soaring prices of used cars and a newfound fandom among retail investors.
A structural change in the pricing power of rental-car companies is allowing Avis and peer Hertz Global Holdings Inc., which recently emerged from bankruptcy, to have better control over what they can charge, Jefferies analyst Hamzah Mazari said on Monday. Mazari also raised his price target on Avis by more than threefold, to reflect the company's potential to sustain higher margins.
Avis shares rose 58% in November, compared with a 0.8% decline in the S&P 500 Index over the same period amid concerns about the omicron variant of the coronavirus and a more hawkish tone from Federal Reserve Chair Jerome Powell.
Morgan Stanley analysts Billy Kovanis and Adam Jonas on Tuesday said that while omicron may have some impact on Avis' earnings in the fourth quarter of this year and the first quarter of 2022, in the medium to long term they remain “very bullish” on a return of travel, led by significant pent-up demand.
“There are also dynamics at play that could also lead to Avis becoming a Covid beneficiary from: supply constraints, car rental acting as a substitute to airline travel, etc.,” the analysts added.
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