CAR Stock Surges To Record Highs – But Barclays Says Current Valuation ‘Not Justified’

• Barclays downgraded the stock to ‘Underweight’ from ‘Equal Weight,’ according to The Fly.
• The brokerage noted that short interest near 100% of the float triggered a sharp short squeeze.
• Earlier this month, Deutsche Bank downgraded the stock to ‘Hold’ from ‘Buy’ while keeping its $128 price target.

Shares of Avis Budget Group (CAR) surged over 11% on Monday to a record high, extending a blistering rally that has seen the stock jump more than 260% this month.

CAR shares have closed in the red in just one session so far this month, and are on track to post their biggest ever monthly gains.

However, brokerages are growing cautious about the stock’s sharp rally, with Barclays being the latest to downgrade Avis Budget Group. On Monday, it cut its rating to ‘Underweight’ from ‘Equal Weight’ and raised its price target to $150 from $95, according to The Fly.

Barclays Cites High Short Interest For Sharp Rally

The brokerage said the rally was driven by a supply-demand mismatch, with two investors holding about 71% of the shares and total economic interest exceeding 100% due to swaps.

Barclays noted that short interest near 100% of the float triggered a sharp short squeeze. It warned the surge may not last and said the current valuation looks unjustified. Barclays expects the share price “to eventually revert, especially if CAR issues equity.”

According to Fintel data, CAR has a short interest of nearly 89%.

Earlier this month, Deutsche Bank downgraded the stock to ‘Hold’ from ‘Buy’ while maintaining its $128 price target, citing valuation concerns and noting that the stock’s price is difficult to justify on fundamentals.

How Did Retail Traders React?

Despite the intraday gains, retail sentiment on Stocktwits turned ‘neutral’ from ‘bullish’ a day earlier. The stock has generated significant buzz on the platform, with message volume up 63% over a 24-hour period and 116% over a seven-day period, according to Stocktwits data.

One user said that while “long-term value will fall back to reality,” it may not happen right away.

Year to date, the stock has gained more than 300%.

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