Car Rental Boost: Deutsche Bank Ups Avis Budget And Hertz To Buy

In separate reports published Wednesday, Deutsche Bank analyst Chris Woronka upgraded two stocks in the Car Rental space, noting that sentiment appeared too negative. Analyst Chris Woronka upgraded the rating on

from Hold to Buy, with a price target of $60. "We believe negative sentiment on CAR has reached extreme levels and the stock now reflects incrementally bearish expectations for pricing growth, despite easier comps in 2H and potentially more rational industry-wide fleeting," Woronka explained. The Deutsche Bank pointed out that Avis Budget's free cash flow yield was "too compelling to ignore," while adding that the consensus EPS and EBITDA expectations for 2015 were already below the midpoint of the company's guidance. Expectations for the next year "appear to remain in check as well, particularly given the likelihood of EPS accretion from share repurchase." Woronka upgraded the rating on

from Hold to Buy, with a price target of $24. The analyst said that one or more company-specific catalysts were "likely to unfold" over the next several months and "spur a reversal in what we view to be historically poor sentiment." In the report Deutsche Bank noted, "Most importantly, before year-end, we expect to hear about meaningful progress on the turnaround agenda and shareholder friendly initiatives. We see considerable optionality in the stock from that standpoint and believe the stock is likely to benefit from optically pleasing earnings lift off a severely depressed base in 2016 and 2017." Hertz is scheduled to file restated financials for 2011-2013 before August 31. The company may also report its 2Q15 results around the same time. Having the restatements completed "could make the stock investible to a wider audience of investors," Woronka said.