Tesla's and Rivian's Tuesday Gains Paled Next to This Car Stock

The stock market moved lower on Tuesday, although the Nasdaq Composite (^IXIC 2.02%) managed to hold its losses to a much smaller percentage than the S&P 500 (^GSPC 1.02%) or Dow Jones Industrial Average (^DJI 0.40%). Investors still seem to value the higher growth that technology stocks and other Nasdaq leaders offer, and that's helping the relative performance of the index compared to its peers.

Data source: Yahoo! Finance.

Tesla (TSLA -1.11%) has made several moves to monetize its Supercharger network, and news that Rivian Automotive (RIVN 6.10%) has joined the growing list of Tesla partners buoyed both stocks. Yet those gains were smaller than what rental car company Avis Budget Group (CAR 1.19%) managed to post on Tuesday. You can read about all the details below.

Rivian signs up for Tesla Supercharger access

Shares of Tesla climbed 5% on Tuesday, continuing their march back toward a $1 trillion market capitalization. The news of the company's partnership with Rivian was the latest catalyst in the big advance for the electric vehicle (EV) pioneer.

Rivian and Tesla came to a deal under which Rivian agreed to adopt Tesla's charging standard. Under the agreement, Rivian customers will have access to the Supercharger network beginning in spring 2024. For current vehicles, adapters will be necessary to use Tesla chargers, but starting in 2025, Rivian will make Tesla-compatible charging ports standard on its vehicles.

The companies didn't disclose any financial terms of the agreement. Some investors have been dubious about Tesla's attempts to differentiate its Supercharger network from the rest of the EV charging industry, thinking that it would eventually turn into a commodity business.

Yet competitors have been slow to come up with a reliable alternative to the Supercharger network, creating anxiety among EV owners and proving the value of Tesla's having associated its brand with the electrical-charging infrastructure that powers its vehicles.

Eventually, investors will see Tesla financials that include revenue from these deals, and that should give a better sense of who stands to gain the most. With Rivian stock also climbing on the news, it's evident that Tesla isn't dealing a crushing blow to its would-be EV competitors.

Can Avis Budget keep ringing up profits?

Avis Budget Group got an even bigger boost, as its stock climbed almost 10% on Tuesday. The rental car giant got a vote of confidence from Wall Street analysts, who believe that its profit surge could last longer than many think.

Morgan Stanley (MS 0.29%) analysts upgraded their rating on Avis Budget stock from equal weight to overweight, and they bumped up their price target on the shares by $48 to a new target of $230. Morgan Stanley has been impressed with Avis Budget's ability to sustain a large fleet of vehicles, as well as being able to squeeze more profit from each of its cars and trucks.

Investors have been uncertain about the stock because of the huge profits that Avis Budget earned in recent years. Earnings of $58 per share in 2022 suggest a backward-looking earnings multiple of just 4, but most of those following the stock see profits falling to around $34 per share in 2023 and $24 to $25 per share in 2024. That would still imply a rock-bottom valuation for the stock.

Most shareholders seem to think that high demand for rental cars can't last at prices this high. Yet if Avis Budget can extend its success a little longer, it could justify a significantly higher stock price.