Hertz Global Holdings, Inc. (NASDAQ: HTZ), is up almost 50% in the premarket on Thursday following an announcement by billionaire Bill Ackman that he had purchased a large stake in the company.
Ackman had a stake of 4.1% in Hertz as of last year. According to a source who spoke with CNBC, Ackman has now increased his stake in Hertz to 19.8%.
Ackman’s Pershing Square has become the second largest shareholder in HTZ. The shares, including today’s gains are now up by more than 100% from their year-todate low.
Hertz’s financial strength does not inspire confidence
Bill Ackman’s large stake in Hertz shares reflects his confidence about the future of this car rental company.
HTZ is still a high-risk asset.
The Nasdaq listed company lost $2.9 billion total in 2024.
Hertz’s financial situation remains fragile, and despite Ackman’s confidence, these losses are indicative of deeper structural problems.
Hertz also made a large bet on EVs and particularly Teslas. But that move backfired.
The company had to deal with significant depreciation and sell a large part of its electric fleet at a loss.
Hertz’s shares don’t pay a dividend, so it isn’t as if that makes it easier to ignore the signs of weakness.
Hertz remains a stock that is highly volatile
Investors should be cautious about Hertz stock, despite Ackman’s announcement. It has a long history of extreme price swings dating back to the meme stock surge in 2020 after bankruptcy.
The billionaire’s investment in HTZ has caused a short-term rally, but it’s important to note that the company is still highly volatile, and therefore, risky, especially with fears of another recession brewing.
The car rental industry is highly competitve, with companies such as Enterprise and Avis holding strong market positions.
Hertz’s financial instability and failed EV-strategy put it at a greater disadvantage than its rivals.
Wall Street disagrees on HTZ shares with Ackman
Bill Ackman’s increased stake in Hertz may signal optimism, however, the underlying financial struggles and failed EV strategy as well as competitive pressures indicate that Hertz is a risky investment for 2025.
Wall Street analysts also disagree with Ackman about Hertz stock.
The consensus rating for HTZ shares is currently “underweight”, with a mean target of $3.31. This indicates a potential downside of over 50% from current levels.
It’s worth noting that Ackman has also made bets that haven’t worked out in the past, despite being a globally respected investor.
In 2015, he bought nearly 20 million Valeant Pharmaceuticals shares at $171 each.
The company’s stock plummeted to just $27 after it was embroiled in a series of accounting scandals and congressional inquiries over its drug pricing policies. This led to a loss of $2.0 billion for the founder and CEO of Pershing Square.
This post Bill Ackman raises stakes in Hertz: Here’s why I’m Not as Optimistic may be modified as new developments unfold.
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