CAR Stock Hits Top Gear With 45% April Surge — Analyst Points To Short Squeeze, Retail Gets More Bullish

• On Monday, Deutsche Bank downgraded CAR’s rating to ‘Hold’ from ‘Buy’ with a $128 price target.
• Sentiment around CAR jumped to ‘extremely bullish’ from ‘bullish one day ago.
• On Stocktwits, CAR stock’s message volumes spiked 2033.3% in the last 24 hours.

Just one week into April, shares of Avis Budget Group are already up more than 45%. And according to at least one Wall Street analyst, the rally may have further to run, even as the underlying business raises concerns.

Deutsche Bank downgraded Avis Budget to 'Hold' from 'Buy' with a $128 price target, implying nearly 40% downside from the stock's last close. The research firm added that the downgrade is "purely fundamental in nature" and acknowledged that on technical grounds, shares could move meaningfully higher from here.

CAR stock has now logged four straight sessions in the green and extended its gains in after-hours trading on Monday.

What's Driving CAR's Short Squeeze?

Deutsche Bank analyst Chris Woronka flagged that the rally appears rooted in a short squeeze and could push prices "significantly higher" from current levels before it runs its course.

Woronka traced the squeeze back to a series of options disclosures by hedge fund Pentwater Capital Management. A regulatory filing from two months ago showed that Pentwater had written put options on Feb. 20 at strike prices ranging from $110 to $150, expiring March 20, a bullish positioning given the stock was trading at $96.47 at the time. The same filing showed that Pentwater had also written call options at strike prices of $150 to $310, also expiring March 20, which would cap its upside beyond those levels.

After March 20, Pentwater disclosed that it had exercised options and purchased CAR stock on March 18 and 19 at prices between $110 and $130, even though the stock was trading at $101.52 and $100.44 on those days, respectively. Since then, CAR has more than doubled.

Short interest remains elevated at 23%, per Koyfin, though slightly below the 24.9% recorded in mid-January.

An additional catalyst emerged in late March, when airport disruptions caused by the partial U.S. government shutdown created long TSA lines and pushed travelers toward car rental counters, triggering a brief surge in Avis and its peers.

Avis Stock: The Fundamental Picture

In February, the company reported a fourth-quarter loss significantly wider than analyst expectations. CEO Brian Choi said, "We fell significantly short of guidance. That's unacceptable, and I have no excuses to offer. What I will say is that the decisions we made were grounded in the information we had at the time."

CFO Daniel Cunha acknowledged the challenges but struck a more forward-looking tone, saying the company does not believe the conditions that caused rental days, depreciation, and revenue per day to move against it simultaneously are present today. For the current quarter, Avis guided for a "reset on the depreciation side," which it said would weigh on core earnings.

How Retail Traders Are Reacting To CAR

On Stocktwits, sentiment for CAR has jumped to 'extremely bullish' from 'bullish' in a single day, with message volume surging over 2,000% in the past 24 hours.

Bullish traders are reaching for eye-catching targets. One user said, "$CAR it's gonna end of week on Friday $250."

Another added: "$CAR $400 tomorrow morning?"

A bearish user commented on the downgrade. "$CAR When a stock goes up on a short squeeze but remains fundamentally broken, it's time to buy some puts."

Avis Budget shares are up nearly 66% year to date, following a roughly 60% gain last year.

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