Investing in Hertz Could Be a Once-in-a-Lifetime Opportunity

This post was originally published on this site

Vehicle rental and leasing services provider Hertz Global (OTCMKTS:HTZGQ) hasn’t fared too well in 2020. It’s been a rough year for Hertz stock holders as this iconic company was devastated by a sharp decrease in car rental demand.

Source: lumen-digital / Shutterstock.com

The culprit, of course, is the onset of the novel coronavirus. This impacted cruise lines and airlines, but it seems as if most of the companies in those sectors will survive. However, we cannot confidently say the same thing about car rental companies, and particularly Hertz.

Hertz is an American icon of a company that’s been renting cars since 1918, believe it or not. Yet, this year Hertz’s existence is threatened due to the pandemic. Sadly, Hertz became the poster child of devastated businesses in 2020 when the company filed for bankruptcy in May.

At the time, the company said, “uncertainty remains as to when revenue will return and when the used-car market will fully re-open for sales.” So, the bearish thesis for Hertz stock is obvious enough. Could it be possible, then, to find a reason to buy the shares now?

A Closer Look at Hertz Stock

Hertz stock used to trade under the ticker symbol HTZ on the New York Stock Exchange. Times have changed, though, and so has the stock.

Unfortunately, Hertz stock was delisted from the New York Stock Exchange on Oct. 30. It’s heartbreaking to consider that a stock that traded in the $100 range in 2014 would eventually threaten to bankrupt its shareholders.

Still, for the time being, there is some value in Hertz stock. The shares trade on the over-the-counter market under the ticker symbol HTZGQ. From late October until mid-November, the stock actually gained some value.

Specifically, Hertz stock ascended from 80 cents to $1.10 during this brief time period. Therefore, at least the bulls can celebrate the fact that the stock broke above the psychologically significant $1 level.

Progressing Well

For a company that filed for bankruptcy protection, it’s hard to define what “progress” means. It certainly doesn’t mean raking in massive revenue.

For Hertz Global President and CEO Paul Stone, “progress” must be defined in a unique way:

“Our U.S. Chapter 11 process is progressing well. Recent, new funding and commitments of more than $6.0 billion allow us to continue taking steps to best position our business as a rental-car and fleet-leasing leader through the pandemic and for the future.”

It’s gutsy for Stone to consider Hertz as a potential “leader” nowadays. Only time will tell whether the $6 billion in financing will be enough to position Hertz for survival, not to mention a leadership position in the industry.

But hey, at least it’s a start and Stone can’t be faulted for having confidence. And maybe Stone’s confidence is justifiable as Hertz plans to refresh its rental-car fleet next year with the purchase of around 229,000 vehicles.

Potential Takeover Target

Owning Hertz stock in hopes of a turnaround is a risky proposition. Until a Covid-19 vaccine is widely available to the public, it’s hard to envision a return to a thriving car-rental market.

But then, there could be another reason to own Hertz stock shares. It’s possible that Hertz could be a takeover target at some point in the future. For all we know, some large company might be mulling an acquisition right now.

Earlier this year, Jefferies analyst Hamzah Mazari considered the possibility of a used-car retailer like CarMax (NYSE:KMX) or AutoNation (NYSE:AN) acquiring part of Hertz’s fleet.

Any of those companies, or perhaps longtime Hertz rival Avis Budget Group (NASDAQ:CAR), might initiate a takeover move. And, the mere rumor of such an event could cause a huge spike in the price of Hertz stock.

The Bottom Line

There’s certainly no guarantee that Hertz will be taken over by a bigger, more financially sound company.

Yet, risk-tolerant investors should consider the possibility of an acquisition. If this actually happens, then Hertz stock could move higher very quickly.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.