Shifting Mobility Trends And Autonomous Disruption Will Weaken Traditional Leasing

Key Takeaways

• Disruptive mobility trends, autonomous technology, and regulatory pressures threaten Ayvens' business model, market size, and profitability through reduced demand and increased costs.
  
• High leverage, integration risks post-merger, and operational inefficiencies may erode earnings and hinder investment in modernization.
  
• Strong post-merger integration, rapid EV growth, and expansion of value-added services drive margin resilience, revenue growth, and position Ayvens for sustained profitability.

Catalysts

Provides service leasing and vehicle fleet management services in the France, Rest of Europe, Latin America, Asia, and internationally.

• The accelerating shift towards shared mobility and a generational decline in car ownership threaten to permanently reduce the size of Ayvens' addressable market, which will constrain long-term revenue growth as fewer corporates and consumers opt for traditional leasing arrangements.
  
• The rapid pace of autonomous vehicle technology could fundamentally disrupt Ayvens' business model, as manufacturers and tech entrants may retain control of fleet management, directly competing for corporate clients and causing earnings and margins to erode as Ayvens loses volume and pricing power.
  
• Intensifying climate regulations and emissions targets expose Ayvens to sharply rising compliance costs and faster depreciation of both traditional and early-generation electric vehicle fleets, significantly compressing net margins and increasing the risk of asset write-downs in future quarters.
  
• High capital intensity and substantial leverage create ongoing exposure to interest rate volatility, making net earnings vulnerable to future macroeconomic tightening and constraining the company's ability to reinvest in digital and fleet modernization as debt-servicing burdens grow.
  
• Integration risks and operational inefficiencies following the ALD/LeasePlan merger may lead to persistent one-off and recurring costs, stalling the realization of forecasted synergies and diminishing improvements to EBITDA and net income over the medium to long term.

Ayvens Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Ayvens compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Ayvens's revenue will decrease by 0.8% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 2.4% today to 4.9% in 3 years time.
• The bearish analysts expect earnings to reach €1.2 billion (and earnings per share of €1.48) by about July 2028, up from €610.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 5.1x on those 2028 earnings, down from 12.7x today. This future PE is lower than the current PE for the GB Transportation industry at 66.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.78%, as per the Simply Wall St company report.

Ayvens Future Earnings Per Share Growth

Risks

• The ongoing digital transformation of mobility and Ayvens' strengthened integration post-ALD/LeasePlan merger are enabling the company to deliver substantial cost synergies and revenue enhancements, which supports higher net margins and earnings over the long term.
  
• Accelerating adoption of electric vehicles across Europe and sustained EV penetration in Ayvens' deliveries (with EVs comprising 41% of car deliveries and strong partnerships, such as with BYD and Volvo) position the company to capture secular growth in green mobility, directly underpinning future revenue and margin expansion.
  
• The expansion of value-added services-including insurance, maintenance, and telematics-with Ayvens Insurance growing service margins, increases customer stickiness and recurring revenues, thereby supporting both revenue resilience and higher net profit margins.
  
• Robust financial performance and capital position, as illustrated by a CET1 ratio of 13.2%, improved ROTE, reducing operating expenses, and positive cost-income jaws, provide flexibility for reinvestment, potential extraordinary capital returns, or attractive dividends, which can drive share price appreciation.
  
• Stabilizing used car markets, gradual normalization of depreciation adjustments, and the company's ability to remain near the upper end of its guidance for used car sales profits per unit all support steady earnings, countering downside risks to near
• and long-term profitability.

Valuation

• The assumed bearish price target for Ayvens is €6.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Ayvens's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €12.2, and the most bearish reporting a price target of just €6.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be €24.7 billion, earnings will come to €1.2 billion, and it would be trading on a PE ratio of 5.1x, assuming you use a discount rate of 7.8%.
• Given the current share price of €9.51, the bearish analyst price target of €6.0 is 58.6% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.