Hertz Upgraded By Macquarie Research: Here's Why

Elevated investments and spending by Hertz Global Holdings, Inc HTZ will soon result in a favorable impact to the rental car company's business, according to Wall Street's newest bull analyst.

The Analyst

Macquarie Research's Hamzah Mazari upgraded Hertz's stock rating from Neutral to Outperform with a price target boosted from $26 to $30.

The Thesis

Hertz's stock has seen a fair amount of selling pressure for several years. But now the industry dynamics within the rental car business have changed and Hertz is considered a "more functional oligopoly," Mazari said in the upgrade note. (See the analyst's track record here.)

After years of heavy investment and spending, Mazari's EBITDA estimate for 2019 is "significantly higher" than what the Street is modeling. The 2019 consensus EBITDA stands at $619 million, but the analyst's 2019 EBITDA estimate is $879 million.

The short interest as a percentage of total float is 25 percent, but the actual figure is "much higher" when excluding the involvement of activist investors at 48 percent, the analyst said.

Finally, Hertz's balance sheet is now "less of a concern" after the company extended debt maturities to 2020 and is now "comfortably" within its consolidated first lien financial maintenance covenant.

Price Action

Shares of Hertz gained more than 3 percent after Thursday's opening bell and was up slightly at the time of publication. 

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