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Thursday, Bank of America (BofA) released a report projecting market share losses in 2025 for car rental companies Avis Budget Group (NASDAQ:CAR) and Hertz Global (NASDAQ:HTZ). According to BofA, trade checks indicate that a leading rental car company is reallocating more vehicles to on-airport locations, aiming to regain its pre-pandemic market share levels. InvestingPro data shows Hertz's overall financial health score is currently rated as WEAK, with the company facing significant operational challenges.
Avis Budget Group and Hertz Global both generate approximately two-thirds of their revenue from on-airport locations. BofA expects this strategic shift by their competitor to result in a decline in market share for both companies in the coming years. This assessment is particularly impactful for Hertz, which carries a substantial debt burden with a debt-to-capital ratio of 0.94 and negative EBITDA of $1.09 billion in the last twelve months. BofA had already anticipated a 1.5% reduction in Hertz's fleet size for 2025 due to its tight liquidity situation.
Furthermore, the report adjusts the growth forecast for Avis Budget Group's fleet. BofA now envisions a flat growth trajectory for CAR, a significant revision from the previously estimated 1.5% increase. The firm's analysis suggests that the largest rental car company's move to increase its presence at airport locations could significantly disrupt the market dynamics that Avis and Hertz currently benefit from. For Hertz, this comes at a challenging time, with gross profit margins already in negative territory at -2.49% and rapid cash burn, according to InvestingPro analysis.Want deeper insights? InvestingPro's comprehensive research report on Hertz reveals 14 additional key investment tips and detailed financial analysis.
The report's findings underscore the competitive challenges that Avis Budget Group and Hertz Global may face in the near future. With the industry still recovering from the disruptions caused by the pandemic, strategic positioning at key revenue-generating locations such as airports is crucial for maintaining market share.
Investors and industry watchers will likely monitor how Avis Budget Group and Hertz Global respond to these predictions and adjust their strategies accordingly. The full impact of these projected market share changes will become more evident as 2025 approaches and companies continue to navigate the post-pandemic business landscape.
In other recent news, Hertz Global Holdings (OTC:HTZGQ) Inc. has experienced significant developments. The company reported Q3 earnings with a revenue of $2.6 billion but faced an adjusted EBITDA loss of $157 million, largely due to a noncash asset impairment charge exceeding $1 billion. Despite these financial challenges, Hertz is executing a strategic turnaround, focusing on fleet management and cost optimization, with the goal of achieving operational excellence by 2025.
The company has also made key executive appointments to bolster its leadership team. Chris Berg and Doria Holbrook are joining as Executive Vice President and Chief Administrative Officer, and Executive Vice President Mobility, respectively. These appointments are crucial as the company navigates significant operational challenges, as noted by InvestingPro.
Furthermore, Hertz announced plans to issue an additional $500 million in senior secured notes, increasing the total outstanding principal amount for this series of notes to $1.25 billion. The proceeds from this move will be used to repay outstanding borrowings and cover consent fees among other expenses.
In other recent developments, Hertz has partnered with Palantir (NASDAQ:PLTR) for fleet management enhancement and is working towards improving financial metrics and long-term growth. These are the recent developments that investors should note as the company continues its financial journey.
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