Hertz Global Holdings Inc HTZ is hurting.
What Happened: JPMorgan Chase analysts have officially thrown the car rental service into the Underweight category.
“We believe rental car companies have structurally increased their earnings power on price discovery and Hertz has before it a number of company-specific opportunities to grow earnings, including new partnerships,” the analysts wrote in a Monday report.
Among the companies Hertz has partnered with are American Express, Tripadvisor, Uber, and Carvana.
But the analysts “likely overestimated” the degree of company-specific structural drivers of higher earnings. Now, they’re scrapping the $5 price target for December 2024 altogether, citing a decline in underlying EBITDA.
JPMorgan also doesn’t expect Hertz to generate positive free cash flow in 2025, “leading to an inability to capitalize upon its now lower share price via repurchases.”
That’s not all. Analysts pointed out how Hertz’s ill-fated attempt to go green resulted in about $1 billion in losses.
Those losses stem from the sinking value of used electric vehicles and pricier repair costs.
Why It Matters: JPMorgan is lowering its 2026 earnings forecast for Estero, Florida-based Hertz to $400 million. That’s down from their previous 2025 estimate of $425 million.
Hertz “is unlikely to generate positive free cash flow in both 2024 and 2025.” Also, the company likely won’t capitalize upon its now lower share price via repurchases, the analysts wrote.
Lastly, Hertz may be on the hook for a $272 million bill related to make-whole premiums and post-petition interest from its earlier bankruptcy, thanks to a U.S. Appeals Court ruling in September, according to the Wall Street Journal.
What’s Next: JPMorgan advises investors to buckle up for volatility, as Hertz isn't expected to return to normalized earnings until after 2026.
Price Action: Shares of Hertz were down 8.6% to $2.97 on Monday.
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