Biggest Risk To The Bear Thesis On Hertz? Carl Icahn

Credit Suisse's Anjaneya Singh noted that his downgrade is mostly due to a concerning update from Hertz's peer Avis Budget Group Inc. CAR,which "presents a negative read-through" for Hertz.

Specifically, Avis Budget reported on Thursday a top- and bottom-line miss in its fourth-quarter report and guided its full-year fiscal 2017 revenue to a range below consensus estimates. Moreover, Avis Budget reported a 1 percent decrease in its Americas volume and 1–2 percent volume growth guidance.

Singh did, however, note that Hertz could grow its volumes at a faster pace than its rival, but the higher growth could come at the expense of pricing, which serves as a net detriment to its EBITDA growth.

"In an environment that presents weak volume growth, flattish pricing, and inflationary fleet costs, we see HTZ struggling to generate profit growth reflected in consensus estimates," Singh wrote.

Short Sellers Be Warned

Singh cautioned there is a risk to his bearish thesis: billionaire activist investor and Hertz's largest shareholder Carl Icahn, whose stake in the company is north of 30 percent.

The analyst believes Icahn could be tempted to take Hertz private if the stock continues to show weakness.

At last check Friday morning, shares of Hertz were down 5.54 percent at $20.46.