Here's Why Avis (CAR) Stock Jumped 7% Today

Shares of Avis Budget Group, Inc. CAR have popped on Monday amid news that the rental car company will push heavily into the world of connected vehicles.

The Parsippany, New Jersey-based company today announced its plans to outfit 50,000 more rental vehicles with new technology. Avis hopes to double its number of “connected cars” by early 2018. “This investment will bring the total of connected cars in the Avis fleet to nearly 100,000,” Avis chief innovation officer Arthur Orduña said in a press release.

“It will also ensure that we remain at the forefront of our industry and will bring us one step closer to realizing what we believe is the future of car rental for our customers.”

Avis’ stock jumped 7.02% in early afternoon trading on Monday. The rental car company’s new connected vehicle plan aims to help improve maintenance and fuel concerns. The connected car agenda also hopes to make pick ups and returns much more simple.

According to an Avis’ statement, the connected vehicle push aims to shorten wait times by enhancing “vehicles’ maintenance needs so that they are addressed promptly and prior to vehicles being rented; fuel consumption measured to the tenth of a gallon for more precise customer billing; mileage readings at the start and end of each rental for a faster experience.”

Avis’s new fleet of connected cars will also allow drivers to make “one-touch returns,” receive instant email receipts, and unlock and lock vehicles via the company’s mobile app. On top of these updates, customers will be able to use Avis’ app to make more precise and quick rentals while at an Avis location.

Tough Times

Shares of Avis have fallen off a cliff since December 2014 when the company’s stock was trading near its all-time high of $66.33 per share. Avis’ outlook doesn’t seem to be getting much better recently. On May 12, Avis president and CFO David B. Wyshner resigned just over a week after the company posted less than stellar first quarter earnings

Avis missed both Zacks Consensus Estimates for revenue and earnings last quarter. The company reported a loss of $0.94 per share, which was well below our estimate of a loss of $0.51 per share. Avis’ revenues were down 2% year-over-year and it posted a net loss of $107 million.

The dismal first quarter earnings report has led to the company to fall to a Zacks Rank #5 (Strong Sell). And Avis might be positioned to slump even further this year.

With competition from ridesharing companies such as Uber along with Avis’ high prices, the car rental company might need more than speedier mobile-based check out times to turn things around.

If you want know more about Ford’s (F) new push towards connected vehicles, read here: Everything You Need to Know About Ford's New CEO

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