Hertz Global Holdings Inc. witnessed a sharp decline of 12% in its stock on Tuesday, signaling a potential record-low close. The drop was primarily attributed to negative news surrounding its smaller competitor, Avis Budget Group Inc.
Hertz's stock price, currently standing at $7.61, is at its lowest level since the company emerged from bankruptcy in 2021, as reported by Dow Jones Market Data. This downturn is part of a larger trend, with the stock falling for four out of the past five days and experiencing a 26% decline year-to-date. Last week, Hertz reported fourth-quarter earnings below expectations due to a $245 million charge associated with its plan to downsize its electric-vehicle fleet. The company initially announced this move in January.
In an attempt to combat weak consumer demand, Hertz aims to sell approximately 20,000 electric vehicles from its fleet, accounting for one-third of the total. However, despite marginally exceeding revenue expectations, the company's losses were greater than anticipated.
Hertz's Downgrade and the Influence of Tesla
Analyzing the current situation, it becomes apparent that Hertz's stock downgrade can be partially attributed to Tesla's involvement in the market.
Meanwhile, Avis Budget Group Inc. faced a tumultuous day on Tuesday, marking its worst performance in four years. The company reported record vehicle sales in the fourth quarter, primarily driven by an oversupply of used cars and a spike in interest costs. Despite surpassing consensus estimates, Avis experienced a surprising revenue decline. As the overall market plummeted due to an unexpectedly high inflation reading in January, Avis' stock witnessed a sharp decline of over 23%.
Hertz's Path to Recovery
During Hertz's earnings call with analysts, company executives made concerted efforts to instill confidence in investors regarding their commitment to profitability and getting back on track. Hertz plans to establish additional revenue streams that yield profits, focusing on expanding its ride-share services as well as enhancing its European and value-brand businesses, as highlighted by Scherr.
Conclusion
Hertz finds itself grappling with a record-low stock price while dealing with the ramifications of its competitor's challenges. However, through strategic initiatives and a firm commitment to recovery, Hertz aims to overcome these obstacles and pave the way for a brighter future.
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