Avis Budget Group, Inc. (CAR) shares rose more than 5% during Wednesday’s session after the company projected a cash burn of $400 million in April, $250 million in May, and $150 million in June. Management expects the cash burn to sequentially improve due to aggressive cost mitigation and fleet reduction activities until reaching positive cash flow by July.
The move comes on the same day that Hertz Global Holdings, Inc. (HTZ) shares fell more than 14% after The Wall Street Journal reported that the company is prepping for bankruptcy. The newspaper’s sources said that Hertz is in talks with lenders on a forbearance agreement after missing an operating lease payment (the company is currently within a grace period).
The travel sector has been hit especially hard by the COVID-19 outbreak, which has dramatically reduced demand for air travel and car rentals. In addition, the used car market – where many rental companies sell vehicles – is seeing depressed levels of demand as consumers tighten their spending levels.
Despite the industry headwinds, the Avis management team believes that the company has sufficient liquidity to weather 2020.
From a technical standpoint, Avis Budget Group stock broke out from reaction highs and moved toward its 50-day moving average at $19.97. The relative strength index (RSI) remains neutral with a reading of 56.26, but the moving average convergence divergence (MACD) continues its bullish move towards the zero line. These indicators suggest that the stock still has room to run.
Traders should watch for an extended breakout from reaction highs and Fibonacci retracement levels of around $17.50. If the stock breaks out, traders could see a move toward reaction highs and the 50-day moving average at about $20.00. If the stock fails to break out, traders could see a move toward trendline support levels at around $15.00.
The author holds no position in the stock(s) mentioned except through passively managed index funds.