USA - Avis Budget stock more than tripled on Tuesday: this is why
Avis Budget Group Inc ( NASDAQ: CAR ) soared more than 200% in the stock market on Tuesday after reporting quarterly results late last night that beat estimates by a significant margin.
A short squeeze at play
The massive increase in the share price was attributed to a “short squeeze” after Avis blew past expectations in the fiscal third quarter.
According to FactSet, more than 20% of the car rental company’s regular shares were sold short ahead of the financial report. But short-sellers were pushed into covering their positions this morning on exceptional quarterly results.
As of writing, more than 18 million shares of the Nasdaq-listed company have been traded versus its daily average of roughly 1.9 million shares. CAR is now exchanging hands at $350 after hitting $535 in the morning session.
Important points in Avis Budget’s Q3 report
Avis earned $674 million in the recent quarter that translates to $10.45 per share. In the same quarter last year, it had posted only $45 million in earnings or 63 cents per share. Adjusted for non-recurring items, the U.S. firm earned $10.74 per share.
The car rental company generated $3.0 billion in revenue that represents an annualised growth of 96% as travel demand surged sharply in the summer quarter on easing COVID-19 restrictions. In comparison, analysts had called for $6.87 of adjusted EPS on $2.7 billion in sales.
The record profit in Q3 saw the board of directors authorise another $1.0 billion in share repurchase, as per the earnings press release . Avis valued its liquidity at the end of the fiscal third quarter at about $1.30 billion.
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