Avis Budget Group Stock Tanks: Here’s Why Investors Are Hitting the Brakes
Avis Budget Group shares skidded into the red today—leaving Wall Street scrambling for explanations. Here’s the breakdown.
Rental roulette backfires
The car rental giant’s stock took a nosedive as travel demand projections got slashed—again. Analysts cite everything from overfleet costs to that pesky 'economic soft landing' CEOs keep pretending isn’t a crash.
Debt drags anchor
Leverage ratios are creeping up faster than airport rental lines. With interest rates still gnawing at margins, those pandemic-era fleet expansions now look… optimistic (read: reckless).
Short sellers smell blood
Hedge funds piled into bearish positions last week—because nothing excites financiers more than a good old-fashioned corporate distress party (BYOB: Bring Your Own Bankruptcy).
The stock’s now down 30% since its post-Covid revenge travel peak. Maybe those 'mobility solutions' PowerPoint slides weren’t the golden ticket after all.
Image source: Getty Images.
Avis hits the brakes
Avis stock had soared through the second quarter, seemingly on renewed hopes for economic growth amid a détente in the trade war. Billionaire Bill Ackman's investment inmay have also attracted attention to the rental car sector. However, the second-quarter results weren't enough to sustain that momentum.
Revenue in the quarter was flat at $3.04 billion, which was slightly ahead of the consensus at $3 billion. The company did make improvements further down the income statement with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rising 29% from $214 million to $277 million.
Avis also announced a multiyear strategic partnership with Waymo to launch fully autonomous ride-hailing in Dallas, where Avis will be responsible for fleet management, and it launched Avis First, a premium offering that includes frictionless curbside pick-up and drop-off, a dedicated concierge, and current-year vehicles.
On the basis of a generally accepted accounting principles (GAAP) basis, the company reported earnings per share of $0.10, down from $0.41 a year ago and well below estimates at $1.83.
What's next for Avis
For the full year, Avis is targeting adjusted EBITDA of $900 million to $1 billion and per-unit fleet costs of $310 to $320 per month.
The company didn't give third-quarter guidance, but the summer season is crucial for the company, as it makes all its profit during the peak travel season.
Despite today's sell-off, Avis seems to be in a good position with product innovations like Avis First. If the economy remains healthy, the stock could climb further.
