Hertz's EV Pivot: Is the Stock a Bargain Amid Transition Turbulence?

In 2021, Hertz (HTZ) electrified markets by pledging to build the world’s largest EV fleet, aiming to lead a green revolution. Four years later, the company faces a reckoning: its ambitious EV strategy has led to steep losses, fleet overextension, and a stock price languishing at $6.95—a fraction of its 2021 peak. Yet beneath the turmoil lies a contrarian opportunity. This article dissects whether Hertz’s strategic pivot to EVs, despite near-term pain, positions it as a valuation outlier in the auto rental sector.

The EV Bet: A Necessary Risk or Misstep?

Hertz’s EV push was both visionary and reckless. The rationale? EV adoption is unstoppable: global EV sales are projected to hit 35% of all auto sales by 2030 (BNEF). Hertz, as a fleet operator, saw first-mover advantage in capturing demand for sustainable travel. However, the execution was flawed. Overbuying EVs at inflated prices during a supply crunch led to $2.9B in annual losses in 2024, including a $245M Q4 hit from selling 30,000 EVs at distressed prices.

But here’s the critical pivot: Hertz’s EV fleet now serves as an asset, not a liability. With tariffs on Chinese imports (a major EV supply source) boosting used-car prices, Hertz’s 500,000-vehicle fleet—now 77% under 12 months old—could see residual values surge. Bill Ackman, who owns 19.8% of Hertz, argues that a 10% rise in used-car prices would add $1.2B to Hertz’s fleet value. This is no minor point: EVs, once a drag on depreciation metrics, could become cash cows.

Transition Costs: Pain or Proof of Progress?

Hertz’s Q1 2025 results reveal the transition’s toll, but also its path forward:
- Depreciation per Unit (DPU) fell 40% YoY to $353, with a sub-$300 target achievable by Q2.
- Fleet rotation reduced operating costs, while retail sales of older vehicles hit record highs, leveraging rising used-car prices.
- Adjusted EBITDA loss narrowed to $325M, a 43% improvement over 2024.

Critics cite Hertz’s $443M net loss as proof of failure. But these figures mask progress. The $9.2B fair market value of Hertz’s fleet (vs. $8.8B book value) signals underlying asset health. The “transition pain” is a temporary cost of rebalancing, not permanent damage.

Cost-Cutting: A Lifeline to Liquidity

Hertz’s ruthless restructuring is stabilizing its finances:
- Fleet capacity cut 8% YoY, reducing overhead while focusing on high-margin markets.
- Direct Operating Expenses (DOE) dropped $92M YoY, with AI-driven maintenance slashing costs.
- Debt refinanced through extended maturities (e.g., $2.9B U.S. vehicle debt to 2027), easing liquidity pressure.

The result? $1.2B in liquidity and a path to positive EBITDA by Q3 2025. This isn’t just survival—it’s a rebirth.

Ackman’s Stake: A Voting Machine for Value

Bill Ackman’s 19.8% stake is a confidence signal, not mere speculation. His $2B+ investment reflects belief in:
1. Tariff tailwinds: Higher used-car prices from trade barriers could supercharge fleet valuations.
2. Operational execution: Hertz’s DPU targets and fleet discipline align with its “Back-to-Basics” strategy.
3. Long-term upside: Ackman projects $2B EBITDA by 2029, justifying a $15B valuation (7.5x EBITDA) and a $30 share price—a 380% gain from current levels.

Ackman’s credibility matters. His Pershing Square has a 93% win rate in activist campaigns since 2005, and his public endorsement has historically boosted stocks like Chipotle and McDonald’s.

Valuation: Why $6.95 Is a Bargain

Hertz trades at $6.95, with forecasts predicting further dips to $5.56 by 2025. But context is critical:
- EV/EBITDA Multiple: Competitors like Avis (CAR) trade at 16.77x, while Hertz’s forward valuation (assuming $2B EBITDA by 2029) would be just 7.5x—a 43% discount.
- Short Interest: A 50% short float creates short-squeeze potential if EBITDA turns positive.
- Asset Coverage: The $9.2B fleet FMV alone exceeds Hertz’s $3.2B market cap, implying $30/share in asset value alone.

Risks and the Contrarian Play

• EV Adoption Lag: If consumers delay switching to EVs, Hertz’s fleet could stagnate.
• Tariff Volatility: U.S. trade policies could reverse, undermining used-car prices.
• Execution Risk: Hertz must hit DPU and EBITDA targets to validate its story.

But the reward-to-risk ratio is compelling. At $6.95, Hertz offers 17x upside to Ackman’s $30 target, while its fleet’s asset value provides a floor. For investors willing to endure near-term turbulence, this is a once-in-a-decade contrarian bet.

Conclusion: Hertz’s EV Pivot Is a Buy

Hertz is a valuation paradox: a company trading below its asset value, with a strategic pivot aligned to secular trends (EV adoption, used-car markets), and a billionaire backer’s seal of approval. The short-term pain of rebalancing is evident, but the long-term payoff—$30+ shares by 2029—is within reach.

For investors, the question isn’t whether Hertz’s transition is turbulent—it’s whether they can stomach the storm long enough to catch the $23+ gain on the horizon. The answer, for now, is yes.

Act now—or risk missing the rally.