Deutsche Bank ups target price of rental car firm Hertz on fleet cost improvement

Investing.com --Rental car company Hertz Global Holdings Inc (NASDAQ:HTZ) has been refreshing its fleet in a cost-efficient manner, write Deutsche Bank (ETR:DBKGn) analysts, while noting that challenges remain in achieving broader financial goals.

On the $1 billion fleet impairment charge taken by Hertz in Q3, the analysts said that the charge was less detrimental to liquidity than initially expected, as much of the impact had already been absorbed through the company’s asset-backed securities (ABS) facility.

Hertz’s guidance for fleet costs in the fourth quarter, expected to be between $350 and $375 per month, further evidenced improvement, analysts highlighted.

The company aims to reduce these costs to below $300 per month by the end of 2025. “We think that is a level that could be supportive of $750+ million of EBITDA in 2026”

Though the analysts cautioned that Hertz still faces challenges in achieving its broader cost reduction targets and maintaining pricing stability amid increased competition in the car rental market.

"It also remains to be seen whether Hertz can regain lost market share in the premium corporate market and whether it can achieve revenue optimization within the Dollar and Thrifty brands," they added.

DB analysts raised their price target on Hertz stock to $4.45 from $3.20, while remaining “hold”.

“We believe the market is appropriately valuing HTZ at the moment”