Avis shouldn’t be overlooked in the rental car space, according to Morgan Stanley. Analyst Adam Jonas upgraded the budget rental car company to overweight from equal rate and hiked his price target to $230 from $182. Jonas’ new target implies the stock could rise 12.6% in the next year. That marks a turn in expectations from his previous target, which reflected the potential for shares to fall 10.9% from Friday’s close. “With the backdrop of normalization in the rental industry, we look for operational execution to preserve what could now be a higher floor for the industry,” Jonas said in a note to clients Tuesday. “With its proven track record of fleet risk management and lower opex as % of sales, we upgrade CAR to OW.” Shares rose 3.5% before the bell. The stock is up nearly 24.6% this year, outperforming the broader market. CAR .SPX YTD mountain Avis vs. the S & P 500 Jonas said Avis has been historically able to get higher revenue while keeping costs lower for better margins compared with Hertz , which he kept at equal weight. (His $20 price target for Hertz calls for a 12.2% gain over the next year.) Revenue per transaction day was also higher for Avis in the first quarter, while the expenses as a percentage of total revenue were lower. Together, that means Avis had a structurally higher EBITDA margin, in line with historical performance. However, Jonas said revenue per transaction day will come down as fleets meet their correct sizes and demand normalizes. Additionally, EBITDA margins will compress and used car prices normalizes and earnings will then come down. But even in this environment, he said both companies should have a new floor given the structural changes seen in the rent industry, with Avis’ floor being relatively higher. — CNBC’s Michael Bloom contributed to this report.