Why Avis Budget Group Stock Zoomed Ahead Today
Key Points
Investors also see potential for a short squeeze on the vehicle rental giant.
We shouldn't forget in which direction oil prices are traveling, however.
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A well-timed marketing campaign and chaos at U.S. airports are among the factors making Avis Budget Group (NASDAQ: CAR) shares very attractive to investors these days. On Thursday, the auto rental conglomerate's stock surged 13% on a generally gloomy day for the market.
Time to hit the road
The current political impasse over the continued funding of the Department of Homeland Security (DHS) has directly affected the functioning of airports. The Transportation Security Administration (TSA) is a sub-agency of the DHS, and its operations have been hampered by the dispute, leading to long lines at airport security checkpoints.
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This, of course, makes driving suddenly more appealing than spending many hours in the airport to catch a plane. Wisely, Avis is pushing a 25% limited-time spring discount, which is sure to increase the temptation for those who want or need to take a journey but are spooked by those wait times.
Another factor in Avis's recent share price acceleration is short interest. Since early 2025, when it reported a shockingly deep net loss in its first quarter, short interest has nearly quadrupled to almost 8 million shares -- out of a current float of slightly more than 13 million.
Slow your roll
Avis and other car rental agencies are sure to capture some business purely because of the airport mess, so the longer it drags on, the more they stand to gain. Personally, I think the impasse will be broken sooner rather than later, as it's quite damaging to the current presidential administration's reputation.
Another factor we have to consider is the recent sharp rise in oil prices, which directly affects gasoline prices. Avis's fleet these days is heavy on gasoline-powered vehicles, and consumers are wary of spending too much at the pump. Finally, it's always hard to gauge when, and even if, a short squeeze will occur, even with a heavily shorted title like Avis.
Given all that, plus the recent run-up in share price, I'd be wary of Avis stock just now.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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