Morgan Stanley upgraded Hertz Global (HTZ) to an Outperform rating (From Equal-Weight) and cut their 12-month price target to $15.00 ($16.00) after the rental company announced that they would be 20k Tesla (NASDAQ:TSLA) units from its 60k global EV fleet.
“HTZ has begun to take decisive action to address self-inflicted challenges from its large EV fleet.” Wrote analysts at Morgan Stanley in a note.
The company’s bold EV strategy has intensified difficulties in both fleet costs and operating expenses, leading to significant cuts in consensus expectations.
Despite the sharp negative revision to FY24 and the resulting sell-off following last week's announcements, analysts at Morgan Stanley argue that these actions contribute to mitigating longer-term risks for the company.
Although some risks continue, they suggest that forward estimates have now declined sufficiently below projections for normalized earnings, warranting an upgrade for this strategically significant rental car giant.
Shares of HTZ are up 7.62% in pre-market trading Thursday morning.