By Nora Naughton and Akane Otani
Avis Budget Group's stock more than doubled Tuesday, following strong quarterly results and a bullish outlook on the recovering rental-car market.
The rental-car company also said it was executing on plans to add more electric vehicles to its global rental fleet and will announce those plans when they are ready.
The rally began late Monday after Avis reported its latest quarterly earnings. The company's better-than-expected profit hit a record and sales surged, thanks to a boom in demand for rental cars throughout the summer. The pace of stock buying then accelerated early Tuesday, prompting multiple trading halts, after Avis said it intended on expanding its role in the adoption of electric cars in the U.S.
The stock closed at $357.17, up $185.71, or 108%, marking the stock's largest single-day dollar or percentage gain ever. Avis alone added 1,164.99 points to the Dow Jones Transportation Average, giving the index its best one-day point gain ever.
Avis Chief Executive Joe Ferraro said on an earnings call that the company's quarterly adjusted pretax profit hit a goal first set in 2014. He said the company, which put in cost-cutting measures and other efficiencies in recent years, is starting to see those efforts produce results, as the rental-car market is coming back in a robust way.
"To finally deliver on that promise in a single quarter after the worst crisis our company has ever faced is honestly a bit cathartic," Mr. Ferraro said.
He added that Avis has had electric cars in its fleet in the past, and it intends on having more of them going forward.
"You'll see us going forward be much more active in the electric scenarios as the situation develops over time," Mr. Ferraro said on the conference call.
On Reddit's WallStreetBets forum, retail traders posted dozens of comments debating the run-up in Avis's shares. Heading into November, data had shown short interest mounting in the stock. Traders who sell securities "short" borrow shares and then sell them, betting they can profit by buying the stocks back later at lower prices.
"CAR about to make bag holders," one user said, referencing slang for investors who mistakenly hold on to a stock until their holdings are worthless because they believe it will stage a turnaround.
Like other rental-car firms, Avis is regaining its footing after bookings collapsed during the onset of the pandemic, when travel restrictions were put in place in response to the Covid-19 virus.
Since then, reservations for rental-cars have rebounded, due in part to more Americans renting cars for road trips and other travel.
Avis's CEO said demand for travel in the U.S. showed positive momentum throughout the spring and continued to pick up in the third quarter. Still, the availability of new vehicles remains tight, putting constraints on fleets, as rental-car demand is outpacing supply, Mr. Ferraro added.
"We are cautiously optimistic that the worst is behind us," he said.
Analysts say the company's adjusted pretax margins of 40% in the Americas stood out given the capital-intensive nature of the rental-car business, which involves model purchases, as well as moving, maintaining and reselling vehicles.
Morgan Stanley analysts likened Avis's operating profitability to that of some mature software companies, saying management is capitalizing on the strong rental environment now.
The strong results follow news last week that rival Hertz Global Holdings Inc. placed a 100,000-vehicle order from Tesla Inc. to help restock its rental-car fleet. The order sent Tesla's stock soaring at the time and pushed up shares of Hertz, which has been traded over the counter since it was delisted in 2020. Hertz emerged from bankruptcy over the summer.
Tesla Chief Executive Elon Musk said late Monday that the electric-vehicle maker hasn't yet signed a deal with Hertz; a Hertz spokeswoman Tuesday stood by the company's earlier announcement and said deliveries of the Teslas have already started.
Without naming Hertz specifically, Avis Budget Group's Chief Financial Officer Brian Choi said the move by one of its competitors to buy electric vehicles was a positive for the rental-car industry overall.
"It pushes [the] pace, and draws attention to what needs to be done to absorb electric vehicles at scale," Mr. Choi said. He added that Avis is executing on its electric-car buying strategy and will disclose more information when plans are completed.
Avis has said it plans to reduce the company's greenhouse-gas emissions by 30% over the next decade.
Write to Nora Naughton at Nora.Naughton@wsj.com and Akane Otani at akane.otani@wsj.com