12:07 PM EDT, 06/13/2024 (MT Newswires) -- Hertz Global ( HTZ ) and Avis Budget Group's ( CAR ) valuations have been revised due to market uncertainty, BofA said in a note Thursday.

The investment bank said it now values the Hertz and Avis Budget ( CAR ) stocks based on normalized earnings before interest, taxes, depreciation, and amortization estimates instead of 2025 EBITDA forecast.

"We expect it could take a few years for rental car earnings to normalize with a persistently wide gap between new and used vehicle pricing (driving elevated vehicle depreciation) and macro risks that could feed into rental car volumes and pricing," BofA said in the note.

BofA said it expects Avis to potentially generate around $1.3 billion in EBITDA through the cycle, while HTZ could generate around $1 billion. "These estimates reflect our expectation that rental car pricing will stabilize around [25% to 30%] higher than in 2019, supported by higher costs, somewhat better market discipline, and general inflation," BofA added.

The firm also said it expects depreciation per unit at about $310, compared with historical levels of $258 for Hertz and $277 for Avis as it could take time for the new-used pricing gap to narrow closer to previous trends.

BofA maintained its buy rating on Avis and underperform rating on Hertz Global ( HTZ ). Its price target remained at $155 for Avis and lowered to $2.50 from $3 for Hertz Global ( HTZ ).

Hertz and Avis shares were declining more than 4% and 3% respectively in recent trading Thursday.

Price: 3.42, Change: -0.15, Percent Change: -4.07