Key Takeaways
- Shares of Avis Budget Group (CAR) have skyrocketed 264% in the past month, dramatically outpacing the S&P 500’s modest 2.8% advance during the same timeframe.
- The primary catalyst appears to be a significant short squeeze, with more than 26% of the company’s publicly available shares held in short positions.
- Operational challenges at TSA checkpoints nationwide have created airport bottlenecks, prompting travelers to choose rental vehicles and increasing demand forecasts for companies like Avis and Hertz.
- Deutsche Bank recently cut its rating on CAR from Buy to Hold, establishing a $128 price objective, while the Street’s overall consensus remains at Hold with an average target of $106.43 — substantially below current market prices.
- Fundamental metrics present challenges: the rental car giant reported a Q4 deficit of $4.60 per share, maintains approximately $8.66B in long-term obligations, and recorded a net deficit of roughly $747M in recent quarterly results.
Avis Budget Group (CAR) has emerged as one of the market’s most peculiar performers this year. Over approximately four weeks, shares skyrocketed from roughly $100.44 to $333.40 — representing an extraordinary surge exceeding 264%. During this identical period, the S&P 500 managed only a 2.8% increase.
The rally hit a speed bump on Tuesday. CAR declined 7.6% during Tuesday’s session following a powerful 24% Monday rally. The shares reached an intraday peak of $334.39 before retreating.
The momentum began attracting widespread attention in late March when TSA personnel shortages triggered by a partial federal government shutdown resulted in extensive airport security queues. As delays mounted, an increasing number of travelers chose to drive instead, channeling demand toward vehicle rental operators.
Both Avis and competitor Hertz (HTZ) captured these benefits. Hertz shares advanced approximately 56% during the past month. On certain trading days, CAR and HTZ exhibited correlated movements — during one particular session, Avis climbed over 14% alongside Hertz as market participants anticipated elevated near-term rental activity.
Short Covering Amplifying the Movement
However, the airport congestion narrative accounts for only a portion of this dramatic price movement. Industry analysts and market commentators identify a short squeeze as a substantial contributing element.
Short interest in CAR exceeded 26% of available public shares as of Tuesday. When stocks carrying heavy short positions begin climbing, short-sellers must purchase shares to close their positions and contain mounting losses, creating additional upward price momentum.
Deutsche Bank analyst Chris Woronka observed earlier this month that additional upside from the squeeze remained possible. He connected recent trading patterns to hedge fund Pentwater Capital Management. Pentwater declined to provide commentary when contacted.
This marks not the first occasion CAR has experienced squeeze dynamics. In November 2021, the stock jumped 110% in a single trading session after earnings results suggested a post-pandemic recovery in travel activity.
Analyst Community Remains Skeptical
Notwithstanding the dramatic price appreciation, the analyst community maintains a measured stance on the shares. Deutsche Bank lowered CAR from Buy to Hold while establishing a $128 price objective. The broader Wall Street consensus similarly stands at Hold, with an average price target of $106.43.
Both forecasts remain considerably below the stock’s recent trading range.
The company’s underlying financial performance offers limited support for current valuation levels. CAR delivered a Q4 shortfall of $4.60 per share, exceeding analyst deficit expectations. Quarterly revenue declined 2% on a year-over-year basis to $2.66 billion.
Throughout the trailing twelve months, CAR produced approximately $11.65 billion in revenue with an EBITDA margin hovering near 12.7%. However, net profitability margins remain in negative territory, burdened by a $518 million impairment charge and substantial interest expenses. Long-term debt obligations total around $8.66 billion, while the company’s latest quarterly filing reveals a net deficit of approximately $747 million.
Shares commenced trading near $288 on Monday, April 13, and concluded above $333 — settling near the session’s highs after repeatedly penetrating resistance in the $310–$325 zone.
