Hertz Global: Sell Rating Amid High Capital Needs and Market Uncertainties

Analyst John Babcock from Bank of America Securities maintained a Sell rating on Hertz Global (HTZ – Research Report) and keeping the price target at $2.70.

John Babcock has given his Sell rating due to a combination of factors impacting Hertz Global. Despite the recent acquisition of a significant stake by an activist investor, Pershing Square, which could potentially bring positive changes and capital infusion, there are underlying concerns that warrant caution. The company’s high free cash flow usage, projected to be around $920 million in 2025 and $300 million in 2026, suggests a need for substantial additional capital. This need for capital could increase the company’s leverage or dilute existing equity holders.
Moreover, there are broader macroeconomic uncertainties and signs of waning travel demand, which could lead to Hertz losing market share. While the company’s shares have seen a sharp rise due to short covering, the sustainability of this increase is uncertain. The company’s ongoing efforts to improve operations, including a new management team, are noted, but the financial challenges and market conditions contribute to the Sell rating. The price objective of $2.70 USD, significantly lower than the current price of $5.71 USD, reflects these concerns.

HTZ’s price has also changed dramatically for the past six months – from $3.160 to $5.710, which is a 80.70% increase.