TLDR:
- Hertz shares jumped 56.4% to close at $5.71 following disclosure of Bill Ackman’s Pershing Square stake
- Pershing Square acquired 4.1% of Hertz (12.7 million shares valued at $46.5 million)
- CNBC reported Pershing’s total Hertz holdings (including shares and swaps) amount to about 19.8%
- Hertz is expected to post quarterly loss of $1.08 per share, a 15.6% year-over-year improvement
- The company previously made headlines for its EV investments, which it later scaled back due to maintenance costs
Hertz Global Holdings saw its stock price surge dramatically on Wednesday after billionaire investor Bill Ackman’s Pershing Square Capital Management disclosed a substantial stake in the car rental company. The stock rallied 56.4% in the last trading session to close at $5.71, with trading volume well above average.
This sudden price movement came after a regulatory filing revealed Pershing Square had acquired 12.7 million shares valued at $46.5 million. This represents a 4.1% ownership stake in Hertz, making Ackman’s firm the third-largest investor behind Knighthead Capital Management and BlackRock.
The stake might be even larger than initially reported. CNBC indicated on Wednesday that Pershing Square’s total Hertz holdings, which include both shares and swaps, amount to approximately 19.8% of the company.
Before this disclosure, Hertz stock had been relatively flat this year. After Wednesday’s dramatic rise, the shares continued their upward momentum with a 33.8% gain in after-hours trading.
Hertz’s Volatile History
This isn’t the first time Hertz has experienced such dramatic stock movements. The company became what many consider the original “meme stock” during the summer of 2020.
After filing for Chapter 11 bankruptcy protection due to pandemic-related business challenges, Hertz shares unexpectedly surged over 800% in just a few weeks. This unusual price action occurred despite the company’s dire financial situation.
Hertz successfully emerged from bankruptcy in 2021 and then made headlines with an aggressive push into electric vehicles. The company announced plans to purchase 100,000 Tesla vehicles as part of this initiative.
However, this EV strategy didn’t play out as planned. Hertz began scaling back its electric vehicle investments due to higher-than-expected maintenance and repair costs. The company also faced challenges from rapidly declining used EV prices in the market.
Financial Outlook and Challenges
By 2024, Hertz was actively selling off a large portion of its EV fleet. The company even began approaching customers directly to see if they were interested in purchasing these vehicles.
The unsuccessful EV bet took a toll on the company’s financial performance. Vehicle depreciation resulted in a $1 billion non-cash impairment charge for Hertz in the third quarter.
Looking ahead, analysts expect Hertz to post a quarterly loss of $1.08 per share in its upcoming financial report. While still in the red, this would represent a 15.6% improvement compared to the same period last year.
Revenue forecasts are less encouraging, with expectations of $2.03 billion, down 2.6% from the year-ago quarter.
Industry analysts note that while the stock price has jumped dramatically, earnings estimate revisions often provide better insight into a stock’s future performance than price movements alone.
For Hertz, the consensus EPS (earnings per share) estimate has remained unchanged over the past 30 days. This lack of positive revisions could be a caution sign for investors excited by the recent price surge.
The stock currently carries a Zacks Rank #3, which translates to a “Hold” recommendation from that analyst firm.
Hertz operates in the transportation services industry alongside companies like Grupo Aeroportuario del Centro Norte (OMAB), which closed up 0.9% at $80.93 in the last session.
Pershing Square did not respond to requests for comment regarding their investment strategy or plans for Hertz when contacted outside of regular business hours.
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