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Why Hertz Global Holdings Stock Dropped 10% Thursday Morning

By Daniel Miller - Mar 5, 2020 at 11:13AM

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Transportation and travel stocks continue to get slammed from COVID-19 coronavirus fears.

What happened

Shares of Hertz Global Holdings (HTZG.Q), operator of the Hertz, Dollar, and Thrifty vehicle rental brands across a number of a countries, are down another 10% early Thursday morning as COVID-19 coronavirus fears continue to spread.

So what

HTZ Chart

HTZ data by YCharts.

Broader markets have also seen volatility over the past month, but many travel and transportation stocks have been hit especially hard. As you can see in the graph above, today's decline was just one part of Hertz Global Holdings' and Avis Budget Group's (CAR 6.03%) larger 37% decline over the past month.

In the short term, the fears are understandable. Some large group events are being canceled, and people are more reluctant to travel. Concern that using transportation services such as Hertz or ridesharing such as Uber could expose consumers to higher risk of COVID-19 certainly adds uncertainty and selling pressure on stocks.

Adding to the pile of concerns was California declaring a state of emergency over the COVID-19 outbreak after the state confirmed its first death from the disease.

Car rental sign

Image source: Getty Images.

Now what

It's easy to get wrapped up in the outbreak fear with constant headlines and news coverage. But in reality, if you're a long-term investor, you simply need to ask yourself one question: Does this change the long-term investing thesis of Hertz? The answer is that COVID-19 likely doesn't do that. Investors would be wise to keep their focus on the rental company's long-term challenges within its control: to drive new revenue opportunities, improve operational efficiencies, and cut costs.

Transportation as a service -- which includes ride-hailing, along with the sharing of cars, scooters, and bikes -- is disrupting the automotive and transportation industries. And if Hertz fails to evolve and adapt, that will likely cause more struggles for the company than COVID-19 will. So take the stock volatility with a grain of salt in the near term.

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Stocks Mentioned

Hertz Global Holdings, Inc. Stock Quote
Hertz Global Holdings, Inc.
Avis Budget Group, Inc. Stock Quote
Avis Budget Group, Inc.
$163.83 (6.03%) $9.31
Uber Technologies, Inc. Stock Quote
Uber Technologies, Inc.
$23.03 (2.95%) $0.66

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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