Avis Stock Pulls Back After Gaining 200 Percent on Earnings Short Squeeze

A sign hangs on an Avis rental car branch in Manhattan, New York, on Jan. 2, 2013. John Moore/Getty Images

A blowout earnings report and a potential short squeeze has shares of rental car company Avis Budget Group Inc. skyrocketing in an extremely volatile session on Tuesday.

What Happened?

Avis reported third-quarter adjusted earnings per share (EPS) of $10.74, beating consensus analyst estimates by more than $4 per share. Revenue also exceeded Wall Street expectations, and the company authorized $1 billion in additional buybacks.

As good as the earnings numbers were, the huge move in Avis stock was likely driven in large part by a short squeeze. Avis’ short interest represented 28.8 percent of its float ahead of the earnings report, according to Ortex Analytics.

Why It’s Important

Avis shares closed Monday’s session at $171.46 but traded as high as $545.11 on Tuesday morning before pulling back significantly. The earnings beat was certainly impressive, but Bank of America analyst Aileen Smith said Avis’ valuation was already stretched even prior to Tuesday’s big run-up.