Avis Budget Group (CAR) Valuation in Focus After Viral Pricing Controversy and Class Action Loss

Avis Budget Group (CAR) is back in the spotlight after a viral TikTok video revealed a stark gap between its advertised rental rates and what customers ultimately pay, due to fees and unexpected surcharges. This discussion comes just as the company faces backlash from a recent $19 million class action lawsuit over improperly charged ancillary fees.

See our latest analysis for Avis Budget Group.

Recent controversies have put Avis Budget Group in the spotlight, but despite the headlines, the 2024 share price return stands out at a robust 72.25%. That momentum reflects investors’ optimism. However, the one-year total shareholder return of 38.21% still lags the headline figure, likely factoring in dividends and buybacks over the long haul. While the stock has pulled back about 7.9% in the past month, its five-year total return of 319.19% points to serious long-term wealth creation, even as near-term volatility persists.

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With shares boasting impressive returns yet controversy swirling, the real question is whether Avis Budget Group is trading at a bargain given its growth prospects, or if the market has already accounted for what comes next.

Most Popular Narrative: 2% Overvalued

With the most recent fair value set at $135.75, just below the last close of $138.56, the narrative points to a modest premium. Investors are watching closely to see if new strategic moves will reshape expectations in the months ahead.

The partnership with Waymo and stated ambitions to become a core fleet and asset manager for autonomous vehicles are stoking future growth narratives. Investors are projecting Avis will capture a sizable share of vehicle miles traveled (VMT) in the autonomous mobility ecosystem, which could lead to long-term revenue and free cash flow expansion. However, these outcomes may not materialize if AV adoption or partnership economics disappoint.

Read the complete narrative.

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Result: Fair Value of $135.75 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, rising competition in premium rentals and rapid shifts toward alternative mobility models could put downward pressure on growth expectations for Avis Budget Group.

Find out about the key risks to this Avis Budget Group narrative.

Another View: How Do Market Multiples Stack Up?

Looking beyond forecast-based valuations, Avis Budget Group currently trades at a price-to-sales ratio of 0.4x. This is notably lower than both peer (2.3x) and industry (1.1x) averages, as well as the calculated fair ratio of 0.9x. This sharp discount suggests the market may be underestimating the company’s potential or heavily factoring in risk, especially given ongoing profitability concerns and sector volatility. Could this deep gap signal a hidden value opportunity, or does it point to real reasons for continued caution?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Avis Budget Group Narrative

If you want to dig deeper or think the story deserves a different angle, you can piece together your own perspective in just a few minutes with Do it your way.

A great starting point for your Avis Budget Group research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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