Avis Budget Group (CAR) stock surged over 10% to $235 on Tuesday, hitting a new 52-week high and extending a month-long rally of 118%. The dramatic move was driven by aggressive call option buying and short squeeze dynamics, as the stock's thin float of just 13.05 million shares amplified price volatility. Peer Hertz Global Holdings (HTZ) also rose 8% on similar momentum.
The squeeze scenario is classic: heavy call buying forces market makers to hedge by purchasing the underlying stock, pushing the price higher and triggering covering by short sellers. This occurs despite bearish fundamental data. Avis reported a disastrous Q4 FY2025, with an EPS of -$21.25, missing estimates by a wide margin, and took a $518 million impairment charge related to its electric vehicle fleet. The company carries $6.1 billion in corporate debt and has negative shareholders' equity.
Wall Street analysts remain overwhelmingly negative, with a consensus "Reduce" rating and an average price target of $115—less than half the current trading price. Major firms like Goldman Sachs ($85 target), Morgan Stanley ($97), and Barclays ($95) see significant downside. The stark disconnect between the stock price and analyst targets is precisely what is fueling the ongoing squeeze pressure.
Institutional activity shows some support, with Pentwater Capital Management increasing its position by 11.9% in February. However, Avis also announced an at-the-market equity offering to sell up to 5 million shares, a move that previously caused a 10% stock drop.
Analysts warn the rally is unsustainable, drawing parallels to past short-squeeze frenzies like GameStop, Opendoor, and GoPro. These stocks saw massive, rapid gains only to collapse later when the hype faded and fundamentals reasserted themselves. Avis's own business is under pressure, with revenue dipping to $11.6 billion annually and EBITDA missing guidance by $152 million last quarter. External factors like the US-Iran conflict could further impact travel demand and costs.
