Last Updated on January 16, 2021 by Kristin
Thinking of investing in car rental stocks? The only major rental car company on the U.S. stock exchanges is Avis Budget Group.
The pandemic has significantly impacted all the big rental companies. Hertz filing for bankruptcy in May. And Avis recording a net loss in Q2 of 2020 followed by a rebound in Q3.
There may be a light at the end of the tunnel. “Rental-car companies, crushed by a collapse in bookings at the onset of the Covid-19 pandemic, are now getting a lift from two unexpected sources,” reported The Wall Street Journal. “Rising used-car prices and more people looking to travel by car.”
Avis Budget Group
Avis Budget Group is the parent company of Avis, Budget and Zipcar, and trades under the Nasdaq symbol CAR. The company reported that reservations fell 60% after lockdowns began in March 2020. Since then, the company implemented furloughs and job cuts to stem losses. Avis also began aggressively selling off a portion of its fleet this spring at depressed prices.
The company reported a Q2 2020 net loss of $481 million year-over-year, with revenues down 67%. However, Avis has seen a rapidly recovering used car market in the second and third quarters. Now it is finding ways to increase its liquidity and slow cash burn.
Analysts have not reached a consensus about whether the stock is a good buy. Avis has seen a stronger market for used car sales and an uptick in travelers choosing to drive to destinations. This prompted an upgrade to “buy” from Morgan Stanley in July.
“It’s been a wild ride for Avis investors,” The Motley Fool wrote in August. “The company watched its rental business grind to a near standstill that sent revenue plunging and forced rival Hertz into bankruptcy protection.”
Used car sales and a preference for driving led Avis to a net profit of $45 million in Q3 2020. This reversed losses in the first half of the year, the company reported to investors in late October.
Hertz Global Holdings
Hertz Global Holdings is the parent company of rental car brands including Hertz, Dollar and Thrifty. It used to trade under the New York Stock Exchange symbol (HTZ).
The company filed for bankruptcy protection on May 22. But the company has pointed to record used-car prices in helping it whittle down its fleet to raise cash.
Hertz’s stocks have seen interesting developments in 2020. The company received court approval in June for a plan to sell $500 million in common stock. Meanwhile, the company warned investors that its shares could be worthless. Hertz then said it would nix the sale after receiving scrutiny from the Securities and Exchange Commission (SEC).
Initially, investors scooped up Hertz stock at cheap prices after the bankruptcy announcement. The Motley Fool advised investors in May to avoid Hertz stock. “Do not buy shares of Hertz right now. Wait to see how the company restructures,” he wrote. “And if it issues new stock in an attempt to continue operations and avoid total liquidation.”
The New York Stock Exchange recently delisted Hertz.
Enterprise Holdings Inc. is privately held and not publicly traded. Like the other players in the car rental landscape, Enterprise has benefitted from the late year uptick in leisure travel. Bookings improving over the summer and customers renting vehicles for longer periods.
The Big Picture on Car Rental Stocks
So, are rental car stocks a good investment? With Enterprise privately held and Hertz off the NYSE, Avis is the only game in town for investors.
The industry outlook is improving. But rental-car bookings are still down compared with 2019.
DISCLAIMER: This information is presented for general knowledge, subject to change and does not constitute investment advice. AutoSlash is not responsible for any decisions made based on this information.