How a 'short squeeze' could still move Avis's stock much higher

MW How a 'short squeeze' could still move Avis's stock much higher

By Tomi Kilgore

Deutsche Bank says car-rental company's recent stock surge isn't justified by fundamentals, but there are 'technical' reasons it could continue

Avis's stock could still rally a lot more because of a technical "short squeeze" triggered in late March, according to Deutsche Bank.

A near doubling in Avis Budget Group's stock in just two weeks is enough to get some analysts to say stop buying - but there are also "technical" reasons for those same analysts to warn investors not to sell.

As Deutsche Bank analysts led by Chris Woronka warned, the "short squeeze" that triggered the recent rally in the car-rental company's shares $(CAR)$ could very well continue, pushing prices "significantly higher" from current levels.

With the stock up 3.3% in recent afternoon trading Monday, the rally Woronka is referring to has nearly doubled the stock's price since March 20.

Deutsche Bank lowered its rating on Avis's stock to hold from buy, but stressed that the downgraded "is purely fundamental in nature." While Woronka sees some underlying positive momentum in company's core business, he finds it difficult to justify the current stock price using traditional valuation metrics with a 12-month horizon.

The analyst wrote in a note to clients that he wanted to be "very explicit" that his downgrade was not a call to sell the stock, because "we firmly believe the stock very well could move significantly higher from here due to technical reasons."

The technical reason is that, as the stock rallies, those that made bets that prices would fall - known as short positions - could be forced to cover those positions as losses widen. And since losses from some of those shorts could be unlimited, the covering of those positions could trigger a stampede of buying, a circumstance known on Wall Street as a short squeeze.

Woronka wrote that there is still "material risk" the stock could see further upside from a short squeeze that he believes can be traced back to disclosures of trades by hedge fund Pentwater Capital Management - particularly a filing with the Securities and Exchange Commission after the March 20 close.

First was a Form 3 filing on Feb. 24 that showed Pentwater had apparently written put options, or obligations to buy, on Feb. 20 at prices ranging from $110 to $150, which expire on March 20. Since the stock closed at $96.47 on Feb. 20, the options were a bullish call on the stock, as they indicated Pentwater believed the stock could rally to above $110 over the next month.

Pentwater did not immediately respond to a request for comment.

The filing also showed the hedge fund had written call options, which are obligations to sell, at prices ranging from $150 to $310 that also expire on March 20. Basically, if the stock was above $150 on March 20, Pentwater would be long because of the put options, but would start taking profit on those longs as the call options get exercised.

But after March 20, Pentwater disclosed that through the exercising of options, it bought Avis stock on March 18 and March 19 at prices ranging from $110 to $130. The stock closed at $101.52 on March 18, and at $100.44 on March 19.

From the March 20 closing price of $99.90, the stock has since run up 96.8%. Over the same time, the S&P 500 SPX has gained 1.3%.

Meanwhile, short interest, or bearish bets made on a stock, in Avis shares is still relatively high - representing 23.5% of the public float, or Avis shares that can be freely traded by the public, according to the latest exchange data.

That's a higher percentage than seen during the original meme-stock rally of 2021, when short squeezes triggered historic run-ups in shares of companies like GameStop $(GME)$ and AMC Entertainment Holdings $(AMC)$. The current reading of short interest in those stocks is 21.3% for AMC and is 15.8% for GameStop.

Of the eight analysts surveyed by FactSet who cover Avis's stock, Woronka is now one of the six who are neutral. There's one bullish analyst and one who is bearish.

But based on Woronka's price target, he appears to be pretty bearish. His $128 target on the stock implies 34.9% downside from current levels.

-Tomi Kilgore

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April 06, 2026 13:44 ET (17:44 GMT)

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