Hertz Stock Plummets

May's Used-Car Slump Wipes Out April Gains

Hertz's turnaround strategy has one glaring weak spot: what it loses when it sells old cars. In April, vehicle disposal went well. But May brought a sudden drop in used-car prices, and those losses wiped out April's progress. The result was net depreciation per vehicle sitting at about $300 per month for the full quarter — exactly the "North Star" ceiling CEO Gil West had vowed to stay under, according to Seeking Alpha.

The irony is that Hertz's rental business is actually running well. Fleet size, revenue per day, and total rental days are all meeting or beating prior targets. Bloomberg noted that year-over-year revenue per day growth even accelerated compared to Q1. Utilization rates held strong at 83–84%. The problem is not customers — it is what happens when Hertz tries to sell the cars afterward.

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$400 Million Capital Raise Spooks Investors

Alongside the profit warning, Hertz announced two deals to raise cash. First, a $100 million common stock offering through a share-lending arrangement with J.P. Morgan Securities. Second, a $300 million issuance of Exchangeable Senior First-Lien Secured PIK Notes due 2030. "PIK" means Hertz can pay interest by adding to its debt balance instead of paying cash — preserving liquidity now but growing the debt pile later, according to Seeking Alpha.

The stock offering structure is also complex. Hertz does not actually receive the $100 million. Instead, the shares go to J.P. Morgan to help bond buyers hedge their risk — a structure that typically puts extra downward pressure on the stock price. Hertz already carries about $20.6 billion in total debt against a market cap of only around $1.6 billion, according to Yahoo Finance.

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Rivals Slide as Used-Car Market Fears Spread

Hertz was not the only one hit. Shares of rival Avis Budget Group fell about 3% in sympathy, according to Seeking Alpha. Investors worry that weak used-car prices could be a broader trend — not just a Hertz problem. If residual vehicle values keep falling across the industry, other rental companies face the same squeeze between strong demand and costly fleet turnover.

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Analysts Split on Whether Sell-Off Goes Too Far

Analyst views on Hertz are sharply divided. TipRanks analysts hold a Sell rating with a $3.00 price target, pointing to deep negative free cash flow and massive leverage. Spark AI rates the stock Neutral, arguing that improving revenue-per-day trends and strong utilization deserve some credit, according to Yahoo Finance.

The skeptical camp argues that a company burning value through car sales during a period of "healthy demand" has a broken business model — not just bad luck. The optimistic camp sees the sell-off as an overreaction, since $50–$80 million in EBITDA is still within the company's own prior guidance range. The next key test: whether the $300 million note offering closes successfully and whether used-car prices stabilize before year-end, according to Bloomberg.

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