Inside the sharp rise and fall of Avis, the market's latest meme stock

• The world of meme stocks is volatile, and Avis is the latest to see a huge rally and a sudden collapse.
• A short-squeeze set off a parabolic rally in the stock this month.
• The tight supply of publicly traded shares and speculative interest fueled the gains.

Avis Budget Group, the car rental company that lost nearly $1 billion last year and is carrying more than $6 billion in debt, was the latest target of retail traders looking for the next market-breaking short-squeeze this week.

The company's stock saw a wild spike, soaring more than 700% in a matter of weeks to a peak of around $714.

Unfortunately, the euphoria has already fizzled, and shares are down 70% from Tuesday's high, trading as low as $214 in Thursday's session.

It isn't the first time Avis stock has gone parabolic. In 2021, in the early days of the meme stock phenomenon, shares soared more than 200% from September to their peak in early November, before then tumbling almost 50% in the following months.

The latest wild ride appeared to be fueled by a single regulatory filing in early April, which showed two firms—SRS Investment Management and Pentwater Capital Management—owned around 70% of Avis stock. The tight supply of shares available to trade and high short interest came together to fuel several weeks of stunning gains.

Analysts at Barclays called the latest surge "technical," and attributed it to a "sharp supply/demand mismatch."

Investors in online trading communities were buzzing about the stock, though they also acknowledged that the momentum was part of a speculative rally, rather than rooted in fundamental. The stock was among the top 15 trending stocks on r/WallStreetBets in the last day, according to data from SwaggyStocks, an analytics platform that tracks sentiment on the popular investing subreddit.

"This is just a lotto ticket trade. Throw in a couple dollars you don't care about losing. If your going to play this at this point," one user on the subreddit wrote this week. "Nice to see meme stocks are back."

Some users speculated that the company was on the verge of a major AI pivot, nodding a recent move by Allbirds that sent its stock soaring last week.

"$CAR will end badly for everyone involved," another user wrote. "The goal of the market is to make money and not hold worthless paper," the person added.

"Going long on this now. Hope I'm not too late to the party," another user said.

Analysts at JPMorgan downgraded the stock on Thursday, pointing to the company's "Unsustainable Valuation Not Supported by Fundamentals."

"We view the recent extraordinary "short-squeeze" driven rally in Avis Budget (CAR) shares as a potentially significant opportunity for management to create lasting value via opportunistic capital market transactions, but are nevertheless downgrading the stock to Underweight from Neutral, given our sense that the shares have risen far above the level we feel can be justified by even the most optimistic view," the bank wrote.

For Avis's part, one way to take advantage of the newfound attention could be to issue more stock at the new premium valuation. Even at the low on Thursday, shares are still up 90% year-to-date. GameStop, the OG meme stock, has periodically used bouts of meme mania to tap the capital markets for new funding.

It's extended a lifeline to the ailing video game retailer long enough that famed short-seller Michael Burry is now among the major bulls.