Is Hertz A Value Stock, Or A Value Trap?

Rental car company Hertz Global Holdings Inc HTZ's stock has seen significant underperformance at a time when the market continues to make all-time highs.

Recent Stock Performance

In the past six months, shares were down around 60 percent while the S&P gained 9 percent. While current underperformance has prompted investors to consider Hertz as a value investment, analysts at Barclays are not convinced and have reduced their price target to $23.

“The key theme has been a mis-prioritization of impressive initiatives (great on paper but ultimately yielded little) over the more basic blocking and tackling,” said Brian Johnson of Barclays.

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A Possible Future

While analysts believe that Hertz could reach the $30 levels, they feel that the story will take too long and has too many uncertainties — historical execution risk and a new CEO.

The rental car business is also seeing pressure from a new wave of sharing economy rental car platforms like TURO, known as the Airbnb of cars, which streamlines the rental experience and gives more options for the consumer.

“With a new CEO at the helm, it wouldn’t surprise us if it takes HTZ 18–24 months to fully address the issues and be well on the path to recovering profitability.”

Barclay’s sees estimates likely to come down sharply, and are now forecasting 2017 EBITDA of $579 million vs a prior $750 million target, citing a less favorable business environment.

Barclays reiterated its Equal-Weight rating on the company.

Shares of Hertz closed Friday at $19.78.

Image Credit: By Dwight Burdette (Own work) [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons