Is CAR a good stock to buy? We came across a bearish thesis on Avis Budget Group, Inc. on Fugazi Research’s Substack. In this article, we will summarize the bears’ thesis on CAR. Avis Budget Group, Inc.’s share was trading at $179.10 as of June 8th. CAR’s trailing and forward P/E were 8.00 and 5.25 respectively according to Yahoo Finance.
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Avis Budget Group is a highly leveraged car rental operator that generated $11.65 billion in revenue in 2025 while reporting a net loss of $889 million, following a $1.8 billion loss in 2024, bringing cumulative two-year losses to $2.71 billion amid persistent margin erosion and rising financing costs. The company carries $25.3 billion in total indebtedness against negative shareholders’ equity of $3.1 billion, reflecting an impaired balance sheet where liabilities exceed equity value and downside protection is effectively absent at the equity level.
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Operating performance is insufficient to support its obligations, with only $0.56 generated per $1.00 of interest expense, underscoring a sub-investment-grade coverage profile and heightened refinancing fragility. Its fleet-based model requires a large annual vehicle rotation funded largely through $19.2 billion in asset-backed debt and $6.8 billion in mandatory purchase commitments, exposing it to residual value compression and demand weakness that can rapidly translate into further earnings deterioration.
Management’s prior capital allocation, including $10.75 billion in share repurchases financed partly with debt issuance, has compressed equity while increasing fixed obligations and amplifying downside sensitivity to any earnings shortfall. Interest costs remain structurally elevated at $1.34 billion annually, including 8.375% senior notes that reflect deteriorating credit perception.
Reported profitability is further distorted by repeated adjustments to non-GAAP EBITDA that exclude recurring fleet impairment and disposal losses, widening the gap between reported performance and economic reality. While episodic short squeezes driven by constrained float and concentrated ownership have temporarily dislocated price from fundamentals, they do not alter the underlying insolvency risk embedded in the capital structure.
Moody’s maintains a Ba3 rating with a negative outlook, with leverage near 8x EBITDA above downgrade thresholds, reinforcing elevated refinancing and covenant pressure. Given negative equity, weak coverage, and cyclical headwinds, the downside risk remains severe, with equity value highly exposed to any normalization of liquidity, credit tightening, or fleet residual deterioration. Overall, Avis Budget Group remains structurally fragile, with asymmetric downside driven by leverage, weak earnings quality, and limited margin for error.