Car rental company’s shares soar after huge earnings beat
A customer boarded a shuttle bus from Avis Budget Group Inc. at Denver International Airport (DEN), Denver, Colorado on Wednesday Oct. 28, 2015.
Luke Sharrett | Bloomberg | Getty Images
Car rental stock Avis Budget surged Tuesday after the company reported a stronger-than-expected third quarter that sparked massive trading volume.
Refinitiv’s consensus estimate was that $10.74 per-share earnings were reported by the company for the third quarter. The results beat $4. Also, revenue exceeded all expectations. Avis Budget also authorized $1 billion additional share buybacks.
Midday saw the stock rise more than 100%. Multiple times on Tuesday, trading was stopped.
There were likely many bets on the stock that contributed to the speed and size of today’s movement.
According to FactSet data, 20% of Avis Budget stock’s float was shorted ahead of the earnings report. This is an unusually high percentage. Short-sellers can buy shares to make up the difference when a stock goes up, which puts more pressure on stock prices. It is known as a “short squeeze”.
Retail traders using social media platforms like Reddit’s WallStreetBets to increase their chances of a short squeeze have helped accelerate some this year. Stocks like AMC Entertainment and GameStop saw dramatic gains earlier in the year due to smaller investors.
At 11:38 AM ET, more than 17 million Avis Budget shares were traded. ET: More than 17 million Avis Budget shares were traded on Tuesday according to FactSet.
Since the beginning of the pandemic the U.S. rent-a-car industry has been experiencing turmoil. In 2020, travel demand plunged leading Avis to rival Hertz to file for bankruptcy protectionAutomakers’ delays in production have caused a shortage of cars available for travelers, resulting in fewer vehicles being made.
Shares HertzThey were also subject to a trade frenzy in the first quarter of this year. Since then, the company has emerged from bankruptcy.