Year to date shares of Avis have rallied about 35%, yet Jim Cramer thinks the stock remains relatively cheap.
"First of all, the rental car industry as a whole is basically a cartel," Cramer explained. That is, a lion's share of the business, 96% of airport based car rentals, are controlled by only three companies, the privately held Enterprise, along with Hertz and Avis.
And Cramer says the car companies are only now taking advantage of the competitive position.
"Any industry where there are only three players of real significance is eventually going to see substantially higher prices," Cramer said. The privately held Enterprise has begun to raise prices in a meaningful way, and I bet the rest of the industry follows."
Also, Cramer says Priceline has been quite vocal about not getting enough inventory from rental car firms. Cramer takes the development as a sign that demand is increasing organically, therefore rental car companies don't need to rely on Priceline, as much, to help rent out cars.