Billionaire Bill Ackman Boosts Hertz Stock with Major Stake

Hertz shares surged 73% after billionaire Bill Ackman acquired a 19.8% stake, citing the company's potential amidst challenging industry conditions. Investors remain cautious as the car rental sector faces economic pressures and Hertz struggles with profitability.

Date: 02-05-2025

AI Rating: 5

Recent developments surrounding Hertz Global Holdings (NASDAQ: HTZ) have created volatility in the stock market. The announcement of billionaire investor Bill Ackman acquiring a substantial 19.8% stake has driven the stock price up by 73% as investors speculate on Hertz's turnaround potential. However, caution should prevail when analyzing Hertz's long-term prospects.

Ackman's stance highlights the company's leveraged automobile portfolio and the possibility of undervaluation stemming from its past missteps with excessive Tesla purchases. He emphasized that current oligopolistic behavior within the car rental industry, alongside an impressive management team and turnaround strategy, could lead to greater returns. Nevertheless, despite the excitement, the fundamentals need careful consideration.

Profitability Concerns
Despite the stock's positive movement, Hertz has been struggling historically. The firm faced bankruptcy during the pandemic and remains unprofitable at present. Analysts predict a modest profit only in 2026, indicating a significant lead time before the company might realize gains. This raises flags for investors contemplating a long-term position in HTZ.

Market Dynamics
The car rental industry is highly cyclical and subject to economic fluctuations. Recent indicators of declining travel demand could hinder Hertz’s recovery and growth prospects. Coupled with potentially rising depreciation expenses due to increasing used car prices from tariffs, these factors present substantial risk to Hertz’s business model.

Future Earnings Releases
As Hertz is scheduled to release its Q1 earnings on May 12, the potential for disappointment looms larger following the hype generated by Ackman's announcement. Should earnings miss expectations, a pullback in the stock price is highly probable. Investors would need to closely monitor the impact of this announcement on key performance indicators once released.

Stocks: HTZ