Shares of Hertz have risen nearly 40% this week.
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Hertz Global Holdings stock has rallied this week on optimism about the health of the rental car market and the naming of the former chief of Ford Motor as interim Hertz CEO.
Hertz (ticker: HTZZ) shares advanced $4.35, or 19.6%, to $26.50 Wednesday and have risen 37% this week. The company’s warrants (HTZZW) advanced $1.38, or 14.1%, to $11.18. The 30-year warrants look like a better bet now than the stock for those bullish on Hertz because they trade below their intrinsic value of $12.70 each. The exercise price is $13.80 a share. (Intrinsic value is calculated by subtracting the exercise price from the stock price.)
Hertz has been buoyed by the strength in shares of rival Avis Budget Group (CAR). Avis shares are up 30% in recent weeks although they fell 20 cents to $128.58 Wednesday.
The continued shortage of vehicles—both new and used—is buoying used-car pricing, benefiting Hertz and Avis when they unload cars from their fleet, and is supporting rental-car pricing.
The expectation that new-car shortages will persist into 2022 is bullish for the rental car companies since it raises the odds that both high used-car prices and robust pricing will continue into next year.
Hertz named Mark Fields as its interim CEO Tuesday, prompting speculation that the company’s roadshow and so-called “re-IPO” after emerging from bankruptcy on June 30 could occur within a month or so. Hertz has said it plans to do both by year-end. Investors seem to like that Hertz was able to get someone of Fields’ stature to become CEO if only for a limited period.
Hertz has said little publicly in recent months other than reporting strong second-quarter results, highlighted by quarterly record $639 million of earnings before interest, taxes, depreciation, and amortization.
The company ended the period with a healthy balance sheet with net cash of $300 million excluding debt backed by its vehicle fleet. Cash likely grew in the third quarter given strong rental car pricing amid vehicle shortages.
There is virtually no analyst coverage of Hertz mostly because its shares are thinly traded on the pink sheets. There likely will be more coverage of Hertz when its shares move to either the Nasdaq or NYSE by year-end.
In a statement, Fields said: “The world is going to be hearing a lot from Hertz in the weeks and months ahead.”
The Hertz story could be a good one including robust earnings power and potential capital returns to shareholders. The company has talked about getting greater exposure to electric vehicles in the years ahead.
Hertz now is valued at $12 billion, against $8.6 billion for Avis. Avis also has about $3 billion of net corporate debt, excluding debt backed by its vehicle fleet. Hertz has $1.5 billion of preferred stock that was issued to funds run by Apollo Global Management (APO).
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