Staff Reporter
Shares of Hertz Global Holdings (HTZ) surged last month after billionaire Bill Ackman, head of Pershing Square Capital Management, announced he had acquired a 19.8% stake in the car rental company, which has long struggled in the stock market.
In a post on X, Ackman shared his reasoning, stating he values Hertz’s highly leveraged asset portfolio and believes it is undervalued due to past issues with excessive Tesla purchases.
He pointed out that more rational competition among the three major players in the market, the resolution of Tesla-related challenges, a new management team with a solid turnaround strategy, and a favorable capital structure could lead to significant returns.
Following Ackman’s announcement, the stock price skyrocketed, finishing April up 73%, according to S&P Global Market Intelligence. However, the stock’s rise at the end of the month may indicate it was overbought in reaction to the news.
Historically, the car rental industry has not been a strong performer for investors, and Hertz has been a consistent underachiever.
The company declared bankruptcy during the pandemic, and its return to the public market has been lackluster, with a market cap around $1 billion before Ackman’s investment. Currently, Hertz is not profitable, though analysts anticipate a modest profit in 2026.
Investing in a car rental stock as economic indicators suggest a potential recession poses risks, as the industry is highly cyclical and sensitive to both leisure and business travel—expenses that are often cut during economic downturns.
Ackman also noted that Hertz’s fleet of 500,000 vehicles provides an advantage in a market where auto tariffs are driving up used-car prices. However, this advantage hinges on Hertz’s ability to maintain and replace its fleet, which it does frequently.
With airlines and Airbnb indicating a slowdown in travel demand, Hertz faces significant challenges as it continues to struggle with profitability and growth.
Hertz is set to report its first-quarter earnings on May 12, and the stock is likely to react to this news. If the results fall short of expectations set by Ackman’s endorsement, the stock could see a decline.
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