PARSIPPANY, N.J. – Shares of Avis doubled on Tuesday after the rental car company's third-quarter results showed it is well on the road to recovery from the damage inflicted by the pandemic on the global travel industry.
Its third-quarter profit easily beat Wall Street expectations and its sales rose above pre-pandemic levels.
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Shares in Avis Budget Group closed up $185.71, to an all-time high of $357.17 on massive volume. They were trading around $35 at the beginning of the year.
The gains may have been amplified due to some investors buying in order to cover bets that the shares would fall. And CEO Joe Ferraro also may have drawn investors' interest with a reference about adding electric vehicles to its fleet.
While making no specific announcement about EVs, Ferraro said on a conference call Tuesday that “you’ll see us going forward be much more active in the electric scenarios as the situation develops over time.”
That came on the heels of rival Hertz’s announcement last week of its plans to buy 100,000 cars from Tesla. Elon Musk, Tesla’s CEO, later tweeted, however, that a contract had not been signed. Hertz shares still rose 2.7% and are up 42% since the announcement regarding Tesla.
Avis, based in Parsippany, New Jersey, reported net income of $675 million, or $10.45 per share. Its adjusted earnings per share of $10.74 were well ahead of analysts' target of $6.87, according to FactSet.
Sales topped $3 billion for the period, doubling the same period last year and 9% higher than 2019's third quarter.
“We are seeing the benefits of initiatives we began during the early days of the pandemic and look to build on this positive momentum as the travel environment continues to normalize," Ferraro said in the earnings announcement.
Prior to Tuesday, many investors appeared to be pessimistic about the company's future. According to FactSet, about 20% of shares in Avis had been sold short by investors expecting to profit if the stock fell.
As a result, Tuesday's huge surge was likely partly fueled by short sellers having to buy the stock in order to close their short positions.