Wall Street Likes Car Rental Stock
This week's strong performance by Dollar, Avis and Hertz is a positive step as analysts expect 2010 to remain a challenging year for the industry.
The strong performance by major rental companies Dollar Thrifty Automotive (DTG), Avis Budget Group (CAR) and Hertz Global Holdings (HTZ) in the stock market this week created some positive responses from financial analysts.
DTG stocks went up 3.6 percent to $34.72 on Tuesday, according to Chip Brian at Benzinga.com. DTG’s performance is indicative of the auto rental industry’s current uptrend, the analyst wrote.
Option volume on CAR accelerated Tuesday, after analysts at Sidoti gave the stock a “buy” rating, according to Andrea Kramer at Schaeffer’s Investment Research. “By the closing bell, the car rental concern saw roughly 8,700 calls and 5,000 puts exchanged – about eight times its expected call volume, and more than 10 times its predicted put activity,” she wrote.
Analysts at Northcoast Research upgraded HTZ shares from “neutral” to “buy” this week and established a price target of $14. Year-to-date, HTZ shares have underperformed both CAR and DTG shares by approximately 3 percent and 38 percent, respectively. However, the firm said it upgraded the HTZ’s shares for several reasons, including its belief that corporate travel demand is increasing and the rental business is showing signs of stabilization.
The firm said 2010 will continue to be a difficult year for the industry, but price stabilization and gains in utilization will help improve profitability.
“Overall we believe conditions in the equipment rental market will remain challenging in the first half of 2010 with stabilization occurring in late 2010,” said Northcoast Research. “While revenues in 2010 may likely be lower on a year-over-year basis, we are optimistic that equipment rental companies can improve profitability with stabilizing pricing and gains in utilization.”
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