Shares of Hertz Global Holdings (HTZ +5.11%) were skyrocketing last month on news that billionaire Bill Ackman, head of Pershing Square Capital Management, had taken a 19.8% stake in the car rental company and longtime laggard on the stock market.
Ackman explained his rationale in a post on X, saying that he likes its highly leveraged portfolio of automobile assets and sees it as being undervalued due to an earlier debacle from buying too many Teslas.
He argued that more-rational competitive behavior in an oligopoly dominated by three companies, the end of the Tesla issue, a new management team with a promising turnaround plan, and attractive capital structure could generate a significant return on investment.
The stock soared on Ackman's announcement and finished the month of April up 73% according to data from S&P Global Market Intelligence.
As you can see from the chart below, the surge came immediately after Ackman's stake was revealed.
The stock pulled up at the end of the month, which could be a sign that it was overbought in response to the Ackman news.
Is Ackman right about Hertz?
The car rental industry has historically been a bad one for investors, and Hertz has been a longtime underperformer. The company was forced into bankruptcy during the pandemic, and its return to the public markets has been inauspicious so far, with its market cap hovering at just around $1 billion prior to Ackman's announcement. And it is still not profitable, though analysts call for a modest profit in 2026.
Buying a car rental stock as economic data signal that the U.S. could be entering a recession is a risky move since the car rental industry is highly cyclical and sensitive to both leisure and business travel, which are among the first expenses to get trimmed in weak economies.
Ackman also argued that Hertz's fleet of 500,000 vehicles gives it an edge in a world where auto tariffs drive used-car prices up. That would only make sense if Hertz didn't need to replace those vehicles, which it does frequently.
If anything, tariffs seem likely to be a headwind for the company because it's likely to have to take larger depreciation expenses as it pays more for used cars.
Image source: Getty Images.
What's next for Hertz
Airlines and Airbnb are already signaling that travel demand is slowing down, which would be a significant headwind for a company that is already unprofitable and barely growing.
Hertz will report first-quarter earnings on May 12, and shares are likely to move on the news. If the update doesn't live up to the Ackman hype, the stock could tumble.
