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 after Avis said it recovered sharply from the pandemic lows in Q3.
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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