Goldman Moves CAR to 'Sell' After Weak Q2; Investors Eye a 37% Downside Risk

Avis Budget Group (CAR), a global leader in car rental and mobility solutions, has just been hit with a significant downgrade from Goldman Sachs. The influential investment bank shifted its stance from 'Neutral' to 'Sell' and set a new price target of $105—well below the current trading price of roughly $165.65. This development comes on the heels of a disappointing second quarter and places the stock squarely in the spotlight for investors seeking to gauge risk and opportunity in the broader transportation sector. Analyst upgrades and downgrades from firms like Goldman often serve as catalysts, reshaping sentiment and, at times, triggering sharp market moves.

Key Takeaways

• Goldman Sachs downgrades CAR to 'Sell', targets $105: This implies a potential downside of approximately 37% from the current share price.

• Recent earnings miss and falling EPS: Q2 earnings per share dropped 76%, with flat revenue, causing investor concern and immediate price pressure.

• Stock under heavy selling pressure: Shares have declined sharply post-earnings, underperforming sector averages, and now trade near technical support.

• Technical and sentiment indicators show caution: Recent RSI is below 30, signaling oversold conditions, but the new price target suggests further weakness.

• Goldman's reputation adds weight to the call: As a premier Wall Street research house, Goldman's cautious stance is likely to influence institutional flows.

Goldman Sachs' Downgrade: A Signal Too Strong to Ignore?

Why This Call Matters for CAR Investors

Goldman Sachs—arguably the most influential investment bank in the U.S.—has a track record of moving markets with its research. The downgrade of Avis Budget Group from 'Neutral' to 'Sell', paired with a price target slashed to $105, is not just a routine adjustment. It reflects a pronounced shift in the bank's outlook on the company and, potentially, on the broader car rental industry. Goldman's research desk is renowned for its rigorous sector analysis and wide institutional following; such an explicit bearish call is likely to ripple through hedge funds, quant models, and portfolio managers alike.

Goldman's downgrade aligns with recent negative news flow and a clear deterioration in financial performance, sharply diverging from the consensus until now. For context, the new price target is nearly 37% below the current market price, highlighting the depth of Goldman's concern about CAR's near-term trajectory. In the words of one industry observer, "When Goldman moves the needle, the Street listens."

The Business Behind the Ticker: Avis Budget Group in Focus

Avis Budget Group is a mainstay in the global car rental space, operating the Avis, Budget, and Zipcar brands. Its business model is highly sensitive to travel demand, fleet costs, and the broader economic cycle. With operations spanning North America, Europe, and beyond, the company has historically benefited from both leisure and corporate travel tailwinds.

However, the past year has exposed weaknesses: rising fleet costs, softening post-pandemic travel demand, and intensifying competition from rideshare and peer-to-peer platforms are all weighing on margins. Recent earnings have added fuel to the fire.

Q2 Earnings: The Catalyst for a Bearish Turn

• Q2 EPS Down 76%, Revenue Flat: According to The Motley Fool, Avis' second-quarter earnings were a major disappointment. EPS dropped a stunning 76%, while revenue failed to show any material growth. This miss was promptly punished by the market, as reflected in a sharp stock price decline.

• Stock Reaction: As reported by The Motley Fool, shares tumbled nearly 15% after the news broke, with heavy volume and a pronounced shift in sentiment. The RSI now sits below 30—a classic oversold reading—but with Goldman's downgrade, technical buyers may hesitate.

• Earnings Call Highlights: The Q2 earnings call transcript via Seeking Alpha provided little reassurance. CEO Brian J. Choi acknowledged "persistent inflationary pressures and competitive headwinds," while also signaling more cautious fleet management going forward.

Stock Performance and Technical Picture

• Yearly Range: CAR shares have traded between $54.03 and $212.81 over the past year, peaking just days before the Q2 report. Current price action near $165.65 marks a rapid retreat from highs, with the stock now sitting below both its 20-day EMA ($184.68) and SMA ($190.80).

• Volume and Volatility: The last week saw above-average volatility and a spike in trading volume as investors digested disappointing earnings and the subsequent downgrade. With an average daily volatility of 5.22% and average daily volume of over 1 million shares, short-term traders may find both risk and opportunity.

• Sentiment: With 125 up days and 123 down days over the past year, sentiment has been finely balanced—until now. The recent shift to more down days, especially post-earnings, suggests the tide has turned bearish.

• Technical Indicators: The most recent RSI reading is 29.95, typically considered 'oversold.' However, Bollinger Bands indicate that the stock could have further room to fall before finding a durable floor, especially given Goldman's new target.

Assessing the 37% Downside: What Does It Mean?

Goldman's $105 price target represents a 37% downside from the current share price. For investors, this is not a trivial margin of error—it is a clear warning that risk is skewed to the downside. Should CAR's operational challenges persist or macro headwinds intensify, further price erosion is plausible.

• Downside Risks: Flat revenue and collapsing EPS signal deeper issues—likely a mix of cost inflation, competitive threats, and fading demand. If these trends persist, Goldman's bearish target could be realized or even exceeded.

• Oversold, But Not a Bargain: While some technical indicators hint at oversold conditions, the fundamental picture is weak. Bargain hunters may need to wait for evidence of a turnaround or a capitulation low.

Analyst Firm Background: Why Goldman's Call Resonates

Goldman Sachs is synonymous with institutional influence. Its analysts are known for deep sector knowledge, robust modeling, and a vast client base among asset managers and hedge funds. When Goldman turns negative—especially with a 'Sell' rating—it often signals broader unease within the professional investing community. This downgrade is especially impactful given that it comes immediately after a damaging earnings miss and at a time when the stock is already under pressure.

"Goldman's downgrade is a wake-up call for anyone assuming CAR's challenges are temporary. Their research desk doesn't make 'Sell' calls lightly."

— Senior Portfolio Manager, Major U.S. Mutual Fund

The Road Ahead: Risks, Opportunities, and What to Watch

• Key Catalysts for Recovery: Investors should monitor fleet costs, travel demand trends, and management's ability to stabilize margins. Any positive surprise here could spark a short-covering rally, but the base case now tilts bearish.

• Potential for Further Downgrades: Should fundamentals deteriorate further, other major brokerages may follow Goldman's lead, compounding downside risk.

• Short Interest and Volatility: With the stock now heavily shorted and volatility surging, expect wild swings. This environment can be treacherous for both bulls and bears.

Conclusion: A Clear Warning Sign, Not a Contrarian Opportunity

Goldman's decisive move from 'Neutral' to 'Sell' with a $105 price target for Avis Budget Group should not be ignored. The downgrade, combined with weak Q2 earnings and deteriorating sentiment, sends a clear message: risk now outweighs reward for CAR shareholders. While the stock may look oversold on some technical measures, the fundamental picture remains challenged and could get worse before it gets better. For investors, vigilance and careful risk management are paramount as this story continues to unfold.