Hertz Global Holdings (OTC:HTZGQ) Inc. (NASDAQ:HTZ) is grappling with the fallout of its electric vehicle (EV) rental strategy, which has resulted in high costs and margin impacts. The company's shares have dropped to $8, a stark contrast to the average cost of $19 per share during its stock buyback program.
The company's third-quarter results for 2023, released this week, revealed an adjusted earnings per share (EPS) profit of 70 cents and revenues rising 8.3% year-over-year to $2.7 billion. However, the company's total net debt has surged significantly since its emergence from Chapter 11 bankruptcy.
The EV rental strategy, aimed at providing Tesla (NASDAQ:TSLA) EVs for Uber (NYSE:UBER) drivers, has faced several challenges. Uber Rent's issues with high mileage by drivers causing rapid depreciation and losses have been mirrored in Hertz's own strategy. The falling pay schedules of Uber have forced drivers to log more miles, leading to increased depreciation and higher collision and damage costs.
In response to these issues, Hertz has activated a comprehensive damage and collections program. Despite the challenges, CEO Stephen Scherr remains committed to the company's strategy to electrify its fleet and continues to provide "easy-to-use educational tools on EV functionality" for drivers.
The third-quarter results highlighted issues like increased EV depreciation resulting in lower residual values and negatively impacting salvage cost value. An oversupply of EVs due to shifting more of its EV fleet to regular rentals has also presented challenges for Hertz.
InvestingPro Insights
In light of the recent developments at Hertz Global Holdings Inc ., InvestingPro provides valuable real-time data and tips for investors. According to InvestingPro data, Hertz operates with a significant market cap of $2590M and a low P/E ratio of 3.41 as of Q3 2023. Despite the company's struggles, it has shown a promising revenue growth of 7.25% in the last twelve months as of Q3 2023.
InvestingPro Tips highlight the company's significant debt burden and rapid cash burn, which align with the challenges faced due to the EV rental strategy. However, Hertz management has been aggressively buying back shares, indicating their confidence in the company's future. The stock is currently in oversold territory, as indicated by the RSI, and is trading near its 52-week low.
InvestingPro offers an additional 18 tips related to Hertz, providing comprehensive insights for potential investors. The combination of real-time data and expert tips offered by InvestingPro can be a valuable resource for those considering investment in Hertz or tracking its performance.
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