Shares of Avis Budget Group Inc.

dropped 2.5% in afternoon trading Thursday, after Morgan Stanley analyst Billy Kovanis recommended investors sell, saying it’s too early for investors to be betting on the “mega-fleet bull case.” The stock has now lost 4.8% since it closed at a record $153.39 on Tuesday, but has still more than doubled (up 103.6%) over the past three months and rocketed 291.6% year to date, while the S&P 500

has advanced just 18.1% this year. Kovanis downgraded Avis to underweight, after cutting the rating to equal weight in March 2021. Although he raised his tock price target to $110 from $85, the new target still implied about 25% downside from current levels. He said he just doesn’t buy that investor suddenly view car rental as a high return-on-invested-capital (ROIC) business in the long run, and that pricing, which has been boosted recently by increased travel and lack of supply, will be permanently higher. “Pricing may very well be higher for a year or two, but we don’t see this as a 3-to-5 year phenomenon,” Kovanis wrote in a note to clients. He added that rental car stocks are “notably cyclical,” so that means, “what goes up, must come down.”

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