• Bearish bets on CAR are still high, while Wall Street analysts remain on the sidelines.
• Bulls expect the stock to reach $1000 within this week.
• CAR stock hit fresh record highs in the last two trading sessions.

Shares of Avis Budget Group (CAR) are on their hottest streak yet this year, following 10 straight sessions in the green, but exhibited signs of snapping it after slipping in overnight trading heading into Wednesday.

CAR stock closed at $135.56 on March 30, and was at $411.50 as of Tuesday’s close, more than tripling in value from that recent low and also hitting fresh record highs in the last two trading sessions.

What’s Driving CAR’s Rally?

The car rental company’s stock is clearly getting pumped as a result of market volatility fuelled by a massive, high-short-interest squeeze. Short interest in CAR stock climbed from 21.41% to 23% in April, per Koyfin data.

On April 9, the stock was halted for volatility at 9:47 am ET, according to Nasdaq data, but trading resumed at 10:00 am ET. The stock closed with a 13% gain that day.

Last week, Deutsche Bank analysts moved to the sidelines on the company, downgrading it to ‘hold’ from ‘buy.’ The research firm justified the downgrade solely on the company’s fundamentals, but noted that the unusual rally could continue due to reasons potentially linked to a short squeeze.

“We firmly believe the stock very well could move significantly higher from here due to technical reasons. However, because we struggle to justify the current share price using traditional metrics and a 12-month time horizon, we feel compelled to adjust our rating accordingly,” said Deutsche Bank analyst Chris Woronka.

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.

How Did Retail Traders React?

On Stocktwits, retail sentiment has turned ‘bullish’ from ‘neutral,’ while messaging volumes remained ‘extremely high.’ 

However, CAR’s Stocktwits stream is seeing an influx of bearish users who are confident about an imminent crash. A report from TheFly in late March noted that bearish bets on CAR hit a record high.

One bull user thinks CAR stock will hit $1,000 by Friday and is not even close to being overbought.

One bearish user predicts that when the stock falls, it will start with a 30% decline, while another user claims CAR stock is “the most overbought stock in the whole market.” 

“This can tank below 250, and fast,” said another bearish user.

Of the 8 Wall Street analysts covering the stock, six have rated CAR ‘hold,’ one ‘buy,’ and one ‘sell.‘  Their consensus price target implies the stock is trading at a 74% premium to its fair value.

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

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