Why Avis Price range Group Inventory Tumbled In the present day

What occurred

Avis Price range Group‘s (CAR 1.05%) shares had been caught within the sluggish lane Tuesday. The veteran automotive rental firm noticed its inventory decline by over 5% on the day, as buyers digested a downbeat observe on the business from an analyst.

So what

Tuesday morning, Morgan Stanley prognosticator Adam Jonas printed a excellent news/dangerous information tackle the auto and automotive rental industries.

Person in car with head on the wheel.

Picture supply: Getty Photos.

The excellent news is that he and his workforce see the present worldwide auto chip scarcity easing within the close to future. Referring to that massive Asian nation the place many such chips are produced, he wrote that “Our Higher China semis workforce is extremely assured that present semiconductor provide is ample to deliver up auto manufacturing.”

The dangerous information is that sure segments of the auto business may really undergo relatively than profit from this. One is used car dealerships, which in line with Jonas have seen worth will increase of greater than 60% on a two-year foundation. One other is the auto rental enterprise.

As a number one firm within the section, Avis Price range Group is within the firing line. With demand softening on the easing of the chip scarcity, these falling costs ought to make shopping for new and used automobiles extra engaging than renting. They could additionally encourage renters to decrease their present charges.

Now what

That mentioned, the automotive rental business is heading into a historically very busy time of the 12 months. That slide in demand may very well be at the least mitigated by the seasonal issue, as individuals clamor to hit the street on holidays this summer season. So maybe Avis did not solely deserve the share worth drubbing it took on Tuesday.


Eric Volkman has no place in any of the shares talked about. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure coverage.

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