On Friday, BofA Securities adjusted its stance on Hertz (NASDAQ:HTZ) Global shares (NASDAQ:HTZ), downgrading the car rental company's stock from Neutral to Underperform. This change comes in the wake of Hertz's first quarter results for 2024, which significantly missed both BofA's and consensus estimates.
The company reported adjusted corporate EBITDA of negative $567 million, a stark contrast to BofA's prediction of negative $22 million and the consensus forecast of negative $92 million. The downgrade was attributed to higher fleet costs that are not expected to decrease significantly in the near term. As a result, BofA Securities has also revised its price target for Hertz, slashing it from the previous $9.00 to $3.00.
The analyst from BofA Securities pointed out that liquidity is becoming a growing concern among investors. This is due to Hertz's aging vehicle fleet, which will require updates at a time when the prices for used vehicles are declining and new vehicle prices are only modestly softening. The company does have various options to manage its liquidity; however, it is anticipated that Hertz may have to take on more leverage.
InvestingPro Insights
In light of BofA Securities' recent downgrade of Hertz Global (NASDAQ:HTZ), investors might find it beneficial to consider additional metrics and insights. According to InvestingPro data, Hertz holds a market capitalization of approximately $1.82 billion, with a Price to Earnings (P/E) ratio of 27.06, which is significantly reduced to 2.88 when adjusted for the last twelve months as of Q4 2023. The company also shows a Price to Book ratio of 0.4, indicating a potentially undervalued stock if assets are accurately reflected on the balance sheet.
Despite the downgrade, Hertz has demonstrated a 7.9% revenue growth over the last twelve months as of Q4 2023, with a gross profit of $1.877 billion and an operating income margin of 8.07%. However, it's worth noting that InvestingPro Tips highlight that the company is operating with a significant debt burden and has been aggressively buying back shares. Furthermore, the Relative Strength Index (RSI) suggests that the stock is currently in oversold territory, and the stock has experienced a significant price drop over various periods, with a one-year total return of -69.11%.
Investors considering Hertz as a potential addition to their portfolio should also be aware that there are 19 additional InvestingPro Tips available, which can offer deeper insights into the company's financial health and stock performance. For those interested in gaining access to these tips, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. This could be a strategic tool for making informed decisions, especially in the current climate where Hertz's stock price movements have been quite volatile.
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