JPMorgan Downgrades Hertz Global Holdings Amid Travel Slowdown

Hertz Global Holdings (NASDAQ:HTZ) shares plunged more than 8% intra-day today after JPMorgan downgraded the company to Underweight from Neutral, citing softer travel trends and challenges in managing its vehicle fleet as key risks for the company’s future financial performance.

JPMorgan highlighted concerns over potential fleet churn, which could drive up depreciation costs and reduce EBITDA. The bank revised its 2025 EBITDA forecast to $325 million, down from a previous estimate of $425 million, and projected $400 million for 2026. This downward adjustment points to a longer recovery period before Hertz returns to normalized earnings, likely extending beyond 2026.

JPMorgan also flagged Hertz’s significant financial leverage and potential litigation costs linked to its past bankruptcy, factors that had not been fully incorporated into earlier valuations. Given these risks, the bank expressed a preference for rival Avis Budget, which it characterized as a stronger operator with less leverage, offering better value in the current market.

Softening travel metrics since Hertz’s last earnings report have raised concerns about a potential decline in transaction volume and revenue per day. Although the recent rise in the Manheim Index—an indicator of used vehicle prices—could temporarily boost Hertz’s earnings through higher residual values, JPMorgan cautioned that this could also lead to quicker fleet turnover, negatively impacting long-term profitability.