Hertz Global Holdings (HTZ, Financial) took a hit on Monday as J.P. Morgan's Ryan Brinkman downgraded the stock to Underweight, sending a clear message: the road to recovery just got longer. Hertz's ambitious pivot to electric vehicles, initially hyped as a game-changer, is now a $1 billion headache. The fallout is real—used EV values are tanking, repair costs are climbing, and a shortage of spare parts for damaged Teslas is making matters worse. Brinkman isn't sugarcoating it; he sees normalized earnings getting pushed out well beyond 2026, with 2024 shaping up to be a rough ride marked by a dip in underlying EBITDA and no positive free cash flow in sight.
The challenges don't stop there. Hertz's heavy debt load is tying its hands, potentially forcing the company to navigate choppy waters without the lifeline of share buybacks. With used-vehicle prices on shaky ground and high refinancing costs, Hertz is bracing for more cash outflows. Throw in a recent adverse court ruling that resurrected litigation risks from its bankruptcy, and the financial landscape looks even more daunting. The path to stability isn't just steep; it's laden with obstacles.
As the stock slid 4% in premarket trading to $3.10, investors are left with one takeaway: Hertz is in for a tough slog. The firm's three straight quarters of EPS losses and mounting headwinds signal a longer-than-expected recovery. While partnerships and price strategies may offer some upside, Hertz needs more than just optimism, it needs a clear-cut strategy to turn things around and weather this transitional period.
