Avis Budget Stock (CAR) Accelerates despite Barclays Flagging a Crash Landing Ahead

Shares in car and truck rental company Avis Budget (CAR) rose roughly 9% early Tuesday, adding to Monday’s 23.27% gain. This comes even as top banker Barclays (BCS) has flagged the new rally as the product of a “sharp supply and demand mismatch” and downgraded CAR to Sell.

Analyst Flags ‘Sharp Short Squeeze’ on CAR

Adding to the bearish move, Barclays analyst Dan Levy slashed his CAR price target by 37%, from $150 to $95, predicting more than 75% downside risk ahead. Levy noted that only two investors own 71% of the shares in Avis Budget and that investors’ total economic exposure to CAR, including via swaps, has exceeded the totality of the company’s tradable shares.

Moreover, the analyst highlighted extremely high interest in CAR stock among short-sellers, with almost all the company’s tradeable shares borrowed and shorted; that is, sellers were betting the stock would plunge. However, as short-sellers have been forced to cover, their buying has helped to fuel a rapid price spike — or what is called a “sharp short squeeze.”

CAR Stock ‘to Eventually Revert’

Levy pointed out that Avis Budget shares traded at $100 a month ago — they were currently up about 9% to $664 per share early Tuesday. The analyst believes that all of these lead to “uncertainty about how long this [rally] will last and whether CAR stock can go higher.”

As a product of a sharp short squeeze, the Barclays analyst believes the current price is not defensible and expects the share price “to eventually revert,” especially if Avis Budget issues new shares. This is regardless of Avis Budget seeing better car-rental business trends.

What Is Avis Budget Stock’s Price Prediction?

Across Wall Street, analysts have a Moderate Sell rating on Avis Budget’s shares based on three Holds and two Sells issued over the past three months.

Moreover, the average CAR price target of $116.60 implies about 81% downside risk from current trading levels.