Shares of rental-car company Hertz Global (NYSE:HTZ) jumped on Friday. The stock gained as much as 11.2%, but closed the trading day up 10.3%. The stock's rise followed an optimistic report on the rental vehicle market from J.P. Morgan analyst Samik Chatterjee.
Addressing rising concerns about how ride-sharing services like Uber and Lyft will impact the rental-car industry, Chatterjee suggested that ride-sharing services and the advent of autonomous driving could present just as much opportunity as they do headwinds:
[W]ith existing scale of fleet operations, rental car companies strike us as natural owners of car sharing solutions, with new entrants likely struggling to achieve threshold volumes in a fragmented market to reach profitability. Moreover, we believe the advent of fully autonomous driving will level the playing field for rental car companies and ride share solutions, making them one and the same, additionally necessitating investments in fleet management services by ride share companies.
Chatterjee set a price target for Hertz at $15. After the stock's rise on Friday, the stock is trading at $14.32.
Chatterjee has a good point about existing car-rental companies' competitive advantage as ride-sharing services become more prominent, and as autonomous vehicles are brought to market in the future. As experienced fleet managers, established rental-car companies possess an advantage, since they already have processes in place for maintaining fleets and disposing of aged vehicles. Since future autonomous vehicles may no longer have drivers, large car-rental fleet managers like Hertz could have the upper hand.