One of the businesses sustaining the most economic damage from the SARS-CoV-2 coronavirus outbreak is the automobile industry, since "stay in place" mandates have drastically reduced the need to drive anywhere.
This has a bad knock-on effect for the car rental industry. This, combined with an awful earnings report from arch-rival Hertz Global Holdings (OTC:HTZG.Q) on Monday, is likely what drove Avis Budget Group's (NASDAQ:CAR) stock down by nearly 11% on the day.
Since Avis and Hertz are the two titans of car rental, developments in one affect investor sentiment in the other.
So it's no wonder investors sold of out Avis, after the latter's ,first quarter of fiscal 2020 revenue fell 9% -- like Avis in its own Q1 -- and landed well short of analyst expectations. Meanwhile, Hertz's net loss was much deeper than those prognosticators' collective estimate.
Avis seemed to be in slightly better shape, but that's only because, unlike Hertz, it's not on life support with its creditors (last week Hertz received a last-minute extension from them to rework some of its $17 billion in debt).
At least, not yet. In order to stay liquid, Avis recently floated $500 million worth of high-yield debt securities.
Expensive debt, a stricken business, and a rival's quick fade is a bad mix for a stock. Investors traded Hertz down last week as if it were a falling knife, and they seem to be coming around to the same sentiment with Avis.