While Avis — and car rental overall — suffered an abysmal second quarter, the company achieved sequential improvements that resulted in “blowing away” earnings estimates in the third quarter.
Photo via Travelarz/Wikimedia.
Wall Street watchers are bullish on Avis Budget Group to close out the year. The company’s stock (CAR) has rebounded nearly 500% from its lows at the onset of the pandemic in March.
On Monday, Investor’s Business Daily (IBD) reported that Avis got a bump in its Relative Strength Rating, which measures how a stock's price action over the trailing 52 weeks matches up against other publicly traded companies. Using a 1 (worst) to 99 (best) score, Avis’s surge from 80 to 83 drives the stock “further into winning territory,” IBD reported.
On Marketbeat.com, Nick Vasco, a former FP&A analyst, wrote on Dec. 23 that Avis’ numbers have been trending in the right direction over the past six months.
In the article, Vasco notes the “abysmal” second quarter that started sequential improvements culminating in Avis blowing away earnings estimates in the third quarter.
He points out that Avis’s shares spiked over 22% in early December when the FDA gave the green light to the Pfizer vaccine. While he notes car rental’s correlation with air travel, which is still at a fraction of pre-pandemic levels, “(T)he vaccine promises to change that,” he wrote. “It remains to be seen exactly how a vaccine will restore travel – immunization certificates are possible – but the travel industry should be able to find a workable solution by the summer or fall of 2021.”
Vasco believes Avis can weather the storm until then, because of its ability to adjust fleet to demand and its solid financial position regarding its fleet debt.
He also cites management’s ability to find “creative ways to work with suppliers and partners to find efficiencies” that will ultimately result in removing over $2.5 billion in costs for 2020.
“A strong used car market has helped the company stay afloat and an imminent vaccine can help Avis return to pre-pandemic levels of profitability sooner rather than later,” he wrote.
Bret Jensen, who authors Insider’s Forum on Seeking Alpha, has a similarly positive outlook. He contends that the pandemic highlighted car rental’s highly variable cost model, which, along with Avis’s good management, has made the company leaner.
“With a rightsized fleet and ample liquidity, Avis Budget is in a solid position to increase its vehicle count when the global economy returns to some semblance of normal,” wrote Jensen on Monday.
While Jensen contends that the economic environment will not likely fully recover for many months, with vaccines imminent, he believes Avis Budget’s performance in 2022 will outperform its initial forecast for 2020.
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