Hertz Struggles with Massive EV Losses, Recovery Pushed to 2026
Hertz Global Holdings (NASDAQ: HTZ) is facing a tough road ahead as its transition to electric vehicles (EVs) hits major financial hurdles. After J.P. Morgan analyst Ryan Brinkman downgraded the company’s stock to Underweight, it became clear that Hertz’s pivot to EVs is proving far more costly than anticipated, with a staggering $1 billion in losses. The road to recovery is now much longer than initially hoped, and financial challenges are mounting.
Electric Vehicle Transition Becomes a Major Setback
Hertz's bold move to integrate electric vehicles into its rental fleet, once touted as a transformative strategy, has become a major financial burden. The declining value of used EVs, rising repair costs, and a shortage of spare parts, particularly for Tesla vehicles, have all contributed to the company’s mounting losses. Analyst Ryan Brinkman didn’t hold back in his assessment, predicting that Hertz’s normalized earnings won’t recover until well beyond 2026.
2024 Forecast: A Rough Year Ahead
J.P. Morgan’s downgrade also comes with a grim outlook for 2024, with no positive free cash flow expected and underlying EBITDA predicted to decline. With Hertz already struggling through three consecutive quarters of earnings-per-share (EPS) losses, the forecast suggests that the company will continue to face significant challenges throughout the upcoming year. Investors are bracing for more volatility as Hertz navigates this difficult period.
Debt and Litigation Add to Financial Woes
In addition to its operational challenges, Hertz is grappling with a heavy debt load that’s limiting its financial flexibility. High refinancing costs and weak used-vehicle prices are squeezing cash flows, leaving the company with fewer options to stabilize its balance sheet. Complicating matters further is a recent adverse court ruling related to past bankruptcy litigation, which has revived legal risks and could lead to further financial liabilities.
Stock Slump Reflects Investor Concerns
As Hertz’s stock dropped 4% in premarket trading to $3.10 following the downgrade, the message from investors is clear: Hertz is in for a prolonged struggle. While the company has explored partnerships and price adjustments in an effort to boost revenue, these measures alone won’t be enough to offset the financial headwinds. Hertz will need a solid, long-term strategy to manage its debt, control costs, and navigate its EV transition if it hopes to turn the tide.
Looking Ahead: The Path to Recovery
The future for Hertz remains uncertain, and its ambitious EV strategy, once a key selling point, is now under scrutiny. With mounting financial challenges and a longer recovery timeline, Hertz must focus on refining its approach, managing costs, and addressing the operational and legal risks that threaten its future.
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