$CAR go vroom vroom šŸš— šŸš— šŸš—

Pricing through the roof, EPS gonna be WAY up. Capacity was removed due to COVID and the oligopoly (HTZZ, CAR, Enterprise) got a taste of sweet-sweet pricing power for the very first time. Unlikely they are eager to go back to the old way of fighting on price in the trenches when only 3 big players dominate the market. They likely find big profits with reduced capacity better than little profits when they used to expand fleet rapidly only to see pricing weaken. No one on Wall St. expects any pricing power to last, which partly why the opportunity exists. $CAR did ~112mm rental days in the "Americas" in 2019. $3 per day in pricing increase at 100% flow through would be an additional $3.60 EPS. {112mm days * $3 * (1-25% tax rate)} / 70mm shares. Historically they have charged $50-60 per day (net revenue) on rentals. It's hard to find vehicles around the country for less than $80/day now. If you see a $15 increase per day, you are looking at {112mm days * $15 *(1-25% tax rate)} / 70mm shares, or $18 EPS increase. The operating leverage to pricing is massive here. $CAR did almost 60mm rental days in non-Americas-international in 2019. The market there has not seen as much volume growth off of the bottom as the US, but should once delta recedes. Similar episode of pricing power should play out in Europe with diminished fleet capacity. $CAR Chairman Hees been buying stock. 8.5mm shares short and really only 37mm float. Float is smaller than appears b/c SRSInvestments has 26% stake and has had for long long time. CAR and HTZZ have relatively new management teams so they may be more profit driven. Uber jacking rates and showing spotty availability makes rental cars more attractive. +COVID Delta puts lid on likelihood of capacity expansion, which elongates the pricing power of this cycle. +Street doesn't understand that the industry went through a massive change... yet... ā€‹ *RISKS - managements prioritize fleet size over profitability (game theory that one will start cutting price to capture volume market share) and are able to secure fleet capacity from auto OEMs. Currently long, but may change mind and sell at any time. Target $120.

back
scot-tagscot-icon

Scouted Idea

We scour the net for great ideas, so you don't have to

Original Post

portfolio-reddit logo

tendiewendie

Jul 26, 2021

48.15%

Change % Since Posting

81.14

Price When Posted

39.07

Change Since Posting

CAR

Avis Budget Group Inc

120.21

0.05
0.04%
Current Price

Is this your Reddit account?

Claim this username to collect earnings from this post, and the portfolio!

portfolio reddit logoportfolio utradea logo

$CAR go vroom vroom šŸš— šŸš— šŸš—

bullish
  • Pricing through the roof, EPS gonna be WAY up. Capacity was removed due to COVID and the oligopoly (HTZZ, CAR, Enterprise) got a taste of sweet-sweet pricing power for the very first time. Unlikely they are eager to go back to the old way of fighting on price in the trenches when only 3 big players dominate the market. They likely find big profits with reduced capacity better than little profits when they used to expand fleet rapidly only to see pricing weaken. No one on Wall St. expects any pricing power to last, which partly why the opportunity exists.

  • $CAR did ~112mm rental days in the "Americas" in 2019. $3 per day in pricing increase at 100% flow through would be an additional $3.60 EPS. {112mm days * $3 * (1-25% tax rate)} / 70mm shares. Historically they have charged $50-60 per day (net revenue) on rentals. It's hard to find vehicles around the country for less than $80/day now. If you see a $15 increase per day, you are looking at {112mm days * $15 *(1-25% tax rate)} / 70mm shares, or $18 EPS increase. The operating leverage to pricing is massive here.

  • $CAR did almost 60mm rental days in non-Americas-international in 2019. The market there has not seen as much volume growth off of the bottom as the US, but should once delta recedes. Similar episode of pricing power should play out in Europe with diminished fleet capacity.

  • $CAR Chairman Hees been buying stock.

  • 8.5mm shares short and really only 37mm float. Float is smaller than appears b/c SRSInvestments has 26% stake and has had for long long time.

  • CAR and HTZZ have relatively new management teams so they may be more profit driven.

  • Uber jacking rates and showing spotty availability makes rental cars more attractive.

+COVID Delta puts lid on likelihood of capacity expansion, which elongates the pricing power of this cycle.

+Street doesn't understand that the industry went through a massive change... yet...

ā€‹

*RISKS - managements prioritize fleet size over profitability (game theory that one will start cutting price to capture volume market share) and are able to secure fleet capacity from auto OEMs.

Currently long, but may change mind and sell at any time. Target $120.

Comments

Write your comment....

Sign in to comment

read-time
1 min

120.00

Target Price

5/ 10

Confidence

6-12 Months

Timeframe
catalyst icon
Earnings Release
catalyst icon
News
catalyst icon
SEC Filing
catalyst icon
Sentiment
catalyst icon
Other Catalyst

CAR Channel

Start new chat
aiodd-ad
next