CAR & HTZ Investor Discussion

On May 23, 2024, DeMatteo Research hosted a discussion on Avis Budget Group Inc (CAR), Hertz Global Holdings Inc (HTZ), and the car rental industry with six investors. The group shared overarching thoughts on the major players, the impact of various industry dynamics (pricing, fleet depreciation, etc.), liquidity & cost of capital, cost-cutting opportunities, competition & strategies, and the outlook for the major players.

Publicly traded companies mentioned herein: Avis Budget Group Inc (CAR), Hertz Global Holdings Inc (HTZ)

Overarching Views on Avis (CAR)

A CAR investor started the discussion by sharing his view that this is an industry that should be “rented” but not owned for the long term as the market tends to overreact to trends in both directions. For example, there was concern in 2020 that CAR would follow HTZ into bankruptcy even though the former’s financials were healthier, and then investors mistakenly believed peak performance from 2021 and into 2022 could persist despite the seemingly unsustainably positive operating environment (pent-up demand, historically low interest rates, etc.). The investor became more constructive on the outlook for CAR following its Q1 blowup (-40% in the second half of February post-earnings), which was caused by the company selling a large number of vehicles in a weak used car market after higher interest rates drove its monthly per unit interest cost up 70% YoY. At current levels, it feels like the pendulum has swung overly bearish, and his broad thesis is that the most significant levers (pricing & depreciation) will likely improve going forward.