Hertz stock is a buy after decision to sell its EV fleet
Morgan Stanley analyst Adam Jonas upgraded Hertz (HTZ) to "Overweight" and raised his price target on the stock to $15 per share following the rental car company's decision to sell 20,000 electric vehicles from its fleet.
In a note to clients, Jonas wrote "HTZ's aggressive EV strategy has exacerbated significant challenges in both fleet cost and opex/unit, driving a significant retrenchment in consensus expectations. We believe the actions announced last week, while driving a sharp negative revision to FY24 and driving a sell-off in the stock, help mitigate longer-term risk to the stock."
Yahoo Finance Live co-hosts Seana Smith and Brad Smith discuss the upgrade.
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Editor's note: This article was written by Luke Carberry Mogan.
Video Transcript
SEANA SMITH: Let's bring your attention to one of the trending tickers here this morning. And that is Hertz. It's rising just about 6%. Have been up more than 7% in early trading. It's rising on a bullish call here from Morgan Stanley.
Adam Jonas, the firm upgrading the stock on the rental car companies recent decision to sell 20,000 of its EV vehicles here, including some Teslas in favor of gas-powered vehicles. Brad and I spoke about that just a few days ago here.
But we take a look at this call and exactly why he's a bit optimistic, Jonas making the case that Hertz has begun to take decisive action to address some of these self-inflicted challenges from its large EV fleet. And as a result, he says, that while risks do remain, he believes that more forward estimates have fallen far enough below our forecast for normalized earnings to drive an upgrade here.
So we're seeing that reflected in the stock price today here, Brad, with share gains of just about 6.5%.
BRAD SMITH: Yeah. He goes on to really remark as well on what the travel environment actually looks like, and the demand for some of these EVs, and where that may be shifting. Did say, though, that there is support of US consumer and travel trends, strong TSA passenger data to kick off the year coupled with the airline team's 2024 outlook for resilient travel, as well, and trends. They're constructive for continued elevated rental demand there.
So a corollary, perhaps, between the number of people who are taking planes and then need to rent a car once they arrive, and the number of people who were just charting a weekend excursion perhaps for all the weekend warriors that are out there.
So, ultimately, it's going to be a larger question of, at what price are they able to offload a lot of the fleet that they've taken on from the EV perspective too.
SEANA SMITH: And, again, this $15 price target here from Morgan Stanley makes it seem-- there's 90% upside, 85% upside here from the current prices. So certainly, a name to keep on your radar.
