CAR Options Red-Hot After Blowout Earnings Beat

There's still plenty of short interest built up around the security

Deputy Editor
Feb 20, 2020 at 2:45 PM
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Rental car specialist Avis Budget Group Inc. (NASDAQ:CAR) entered the earnings confessional last night after the close with impressive results. Specifically, the firm posted fourth-quarter profits of $1.90 per share and a jump in revenue to a record $2.2 billion, both of which beat out analysts' estimates. Avis Budget Group also raised its full-year outlook above expectations, citing strengthening demand for automobile rentals and lower costs on fleet depreciation. 

In response, the stock is soaring, up 13.3% at $48.94 at last check, after hitting a two-year high of $52.98 earlier. Looking back, CAR has been climbing higher since staging a sharp bounce off a recent floor at the $32 region. For the year, the equity is now up 52.3%. 

CAR Feb 20

The earnings beat has options player sprinting to the auto concern. So far, 6,927 calls and 6,382 puts have crossed the tape -- eight times the intraday average. The most popular puts are the May 35 and 27 contracts, while on the call side the February 44 and 45 contracts are seeing the most action. 

While calls and puts are trading at roughly the same clip today, options traders have had a stronger preference for pessimistic positions of late, with 5,668 puts picked up in the last 10 days at the major exchanges, compared to just 2,458 calls. And while short interest is starting to decrease, the 7.28 million shares sold short still represent a solid 10% of the stock's available float, or over seven days of trading at CAR's average daily pace.

Analysts have yet to comment on CAR's impressive earnings results, but there is still room for upgrades. Two in coverage still consider the equity a "hold" or worse. Plus, the consensus 12-month target price of $38 is a 22.5% discount to current levels. 

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