Today is shaping up negative for Avis Budget Group, Inc. (NASDAQ:CAR) shareholders, with the analysts delivering a substantial negative revision to this year's forecasts. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.
Following the latest downgrade, the current consensus, from the seven analysts covering Avis Budget Group, is for revenues of US$8.4b in 2020, which would reflect an uneasy 8.2% reduction in Avis Budget Group's sales over the past 12 months. Prior to the latest estimates, the analysts were forecasting revenues of US$9.4b in 2020. It looks like forecasts have become a fair bit less optimistic on Avis Budget Group, given the measurable cut to revenue estimates.
The consensus price target fell 28% to US$27.25, with the analysts clearly less optimistic about Avis Budget Group's valuation following this update. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Avis Budget Group at US$60.00 per share, while the most bearish prices it at US$11.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.
Of course, another way to look at these forecasts is to place them into context against the industry itself. These estimates imply that sales are expected to slow, with a forecast revenue decline of 8.2%, a significant reduction from annual growth of 1.8% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.2% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Avis Budget Group is expected to lag the wider industry.
The Bottom Line
The clear low-light was that analysts slashing their revenue forecasts for Avis Budget Group this year. They also expect company revenue to perform worse than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Avis Budget Group's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Avis Budget Group after today.
Need some more information? We have estimates for Avis Budget Group from its seven analysts out until 2022, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.