CAR Stock Rises Premarket: CEO Calls Shares ‘Undervalued’ And Rules Out Issuing Stock At Current Levels

• CEO Brian Choi called shares “undervalued” and said the company has no intention of issuing stock at current levels.
• The company raised full-year adjusted EBITDA guidance to $850 million-$1 billion after exceeding its internal plan by about $50 million in Q1.
• Short interest in CAR stands at 25.6%, the highest in nearly six years.

Shares of Avis Budget Group, Inc. (CAR) jumped 2% in premarket trading on Thursday after the company’s CEO said the stock remains “undervalued” and ruled out issuing shares at current levels, offering a strong sign of confidence amid short interest near a six-year high.

CAR stock fell 0.5% on Wednesday, logging its sixth straight session of losses. 

CEO Rules Out Share Issuance At Current Levels

The remarks came during the company’s latest earnings call, as investors weighed capital-allocation priorities following recent volatility stemming from a hedge fund’s stake sale and analyst downgrades.

Responding to questions about whether the company considered issuing equity after a sharp rally in recent times, CEO Brian Choi said that the idea was not under consideration: “We have no intention of issuing shares anywhere near these levels,” he said on the call.

Choi added that he first purchased CAR shares in 2010 and has consistently advocated for share repurchases across multiple roles at the company over the years. He also noted that fully diluted shares outstanding have declined from about 129 million in 2010 to 35 million currently, representing a reduction of about 73%.

“I’ve been very consistent in my belief that our shares are undervalued and have advocated for buying back stock,” he said, adding that the company had repurchased shares at prices as high as $300 following the pandemic. Although Avis maintains an at-the-market equity program, Choi said that it exists mainly as a contingency tool and that issuing shares at current levels “never entered my mind.”

Avis Raises Full-Year Profit Guidance

The comments followed first-quarter (Q1) results that delivered mixed signals. The company reported a loss per share of $8.01, wider than consensus estimates for a loss of $7.50 per share, while revenue rose to $2.53 billion, topping expectations of $2.44 billion. 

Choi said the quarter reflected “a meaningful inflection in our operating performance,” driven by tighter fleet discipline, improving pricing and stronger trends heading into the peak travel season. The company also raised its full-year adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) guidance to a range of $850 million to $1 billion after exceeding its internal plan by $50 million.

Avis added that rental days in the Americas are trending mid-single-digit growth with pricing holding steady, pointing to strong demand heading into the summer travel period.

Pentwater Exit Weighs On Investor Sentiment 

Investors have also focused on recent trading activity from Pentwater Capital, which disclosed the sale of about 4.3 million shares through an options-related transaction earlier this week, contributing to a steep decline in the stock after the filing. 

Choi said the company intends to review the transactions closely and “aggressively pursue all rights on behalf of our stockholders” where appropriate.

Short interest in the stock currently stands at about 25.6%, the highest level in nearly six years, reinforcing the role of positioning dynamics in recent share-price moves. Analyst sentiment has also remained mixed. JPMorgan Chase & Co. recently downgraded the stock to ‘Underweight’, arguing that the valuation appeared “unsustainable” relative to fundamentals after a major rally. 

“I'm not here to trade Avis for value extraction. We're going to put in the hard work and create value by building a better business. It might not be as flashy as making a quick buck, but that's the journey we're on,” Choi said. 

How Do Retail Traders Feel About CAR?

 On Stocktwits, retail sentiment for CAR was ‘extremely bearish’ amid a 122% jump in 24-hour message volume.

One user questioned, “Pentwater sold shares and booked a very nice profit, but they have a ton more shares. They also have a lot more capital to deploy to purchase more shares. What would stop them from locking up the entire float again?”

Another user said, “So a single hedge fund locks up most of the float and drives up the stock with a short squeeze and then dumps millions of shares at near top levels to selfishly lock in sweet gains”

CAR stock has jumped 97% over the past year. 

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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