Hertz Stock Looks Appealing. The Warrants Might Be Even Better.
By Andrew Bary
Updated Aug. 27, 2021 8:47 pm ET / Original Aug. 27, 2021 8:43 pm ET
The rental-car company, valued at $7.5 billion, is coming off a successful second quarter, and the current quarter could be even better.
Hertz Global Holdings (ticker: HTZZ) emerged from bankruptcy on June 30. The shares in the reorganized company, now trading around $16, look appealing. But the better bet is the company’s warrants (HTZZW), trading at $7. The 30-year warrants, a call option with an exercise price of $13.80, are statistically supercheap.
The rental-car company, valued at $7.5 billion, is coming off a successful second quarter, and the current quarter could be even better thanks to strong pricing that reflects robust demand and scarce vehicles.
Hertz has a great balance sheet, with net cash of $300 million, excluding asset-backed debt secured by its fleet. The U.S. rental-car business is an oligopoly with three dominant players: Hertz, Avis Budget Group (CAR), and the private Enterprise. That bodes well for pricing even after the companies build up their vehicle fleets next year.
Hertz has a low valuation based on its earnings before interest, taxes, depreciation, and amortization, or Ebitda. The company could be in position to return cash to shareholders by 2022.
Hertz has little in the way of analyst coverage, but its profile should rise by year end. The stock’s listing is expected to move from the Pink Sheets to either the New York Stock Exchange or Nasdaq by then, and the company plans to do what it calls a “re-IPO,” which could involve the sale of stock by institutional holders who got shares in the bankruptcy reorganization as well as newly listed shares.
Write to Andrew Bary at andrew.bary@barrons.com
