Why I Am Bullish on Hertz (HTZ)
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I believe HTZ is wound extremely tight due to its unusually large short position. If earnings come in better than expected, the stock has the potential to trigger a powerful short squeeze. That said, all of the variables must align for this to play out.
It is critical to understand that this is a high-risk speculation. The downside is significant, and investors must be prepared for sharp declines or even the possibility of a total loss.This idea is only suitable for investors who can tolerate extreme volatility and substantial risk.
Hertz Global Holdings (HTZ) represents a compelling turnaround opportunity driven by a combination of above-average travel demand, a stable used-car market, improving fleet utilization, and a structural reduction in vehicle depreciation stemming from its shift toward direct-to-consumer vehicle sales, including its new partnership with Amazon. While some uncertainties remain—most notably the impact of the late-2025 government shutdown on Washington, D.C. rentals—the core fundamentals suggest that Hertz’s recent return to profitability is sustainable.
Travel Demand Was Better Than Average
U.S. travel demand during October, November, and December 2025 was stronger than historical norms, particularly during the Thanksgiving and year-end holiday periods. AAA projected record holiday travel volumes, with more than 120 million Americans traveling during the year-end period, the majority by car. Road travel is the dominant driver of rental demand, and Hertz is a direct beneficiary of this trend.
Holiday travel intensity translated into high rental pickup volumes, with late November and late December representing peak demand periods. Major leisure markets such as Orlando, Los Angeles, Miami, Phoenix, and Las Vegas experienced elevated rental activity, consistent with strong leisure travel trends. This environment supports above-average fleet utilization for Hertz during Q4.
Fleet Utilization Supports Higher Dollars per Day
Despite normalization in average daily rental rates versus post-pandemic peaks, Hertz has materially improved fleet utilization, which is the more important profitability lever. In 2025, Hertz reported utilization levels in the low-to-mid 80% range, reaching record levels in certain quarters.
Higher utilization increases revenue per vehicle per day even in a flat pricing environment.Simply put, more cars earning revenue more often leads to stronger operating leverage. The combination of solid leisure demand and disciplined fleet sizing has allowed Hertz to offset modest pricing pressure with higher usage intensity.
This dynamic supports my view that dollars per day per vehicle were above average in Q4 2025, contributing meaningfully to the company’s return to profitability.
Used Car Market Was “Okay,” Which Matters
The used car market in 2025 was not overheated, but it was stable and functional, which is exactly what a rental company needs. Wholesale and retail used-car values held up far better than feared, supported by limited off-lease supply and steady consumer demand.
This stability allowed Hertz to exit vehicles without taking significant losses, a critical shift from prior periods where depreciation was the dominant earnings headwind. Importantly, the company did not need used car prices to rise aggressively—only to avoid collapsing. That condition was met.
Amazon Partnership Lowers Depreciation Per Vehicle
One of the most underappreciated drivers of Hertz’s improving profitability is its expansion intodirect-to-consumer used-vehicle sales, including its partnership with Amazon Autos.
By selling retired fleet vehicles directly to consumers rather than relying primarily on wholesale auctions, Hertz is capturing higher resale values and reducing per-unit depreciation. This strategy materially improves fleet economics. Management has already demonstrated this impact, with monthly depreciation per vehicle falling dramatically versus prior years.
Lower depreciation flows directly to EBITDA and free cash flow. The Amazon partnership expands distribution, accelerates inventory turnover, and increases price transparency for buyers—further supporting higher residual values. This initiative should continue to structurally improve profitability.
Profitability Has Returned for the Right Reasons
Hertz’s recent return to profitability is not the result of financial engineering or one-time factors. It reflects:
- Higher fleet utilization
- Lower depreciation per vehicle
- Improved fleet composition
- Better cost discipline
These are durable operational improvements. Management’s focus on “buying right, holding right, and selling right” is working. The business is now structured to generate profits in a normalized pricing environment.
Key Uncertainty: Government Shutdown Impact
The primary variable that is difficult to quantify is the impact of the late-2025 government shutdown on Hertz’s Washington, D.C. business. Government and corporate rentals historically represent a meaningful portion of demand in that region.
While shutdown-related disruptions likely pressured D.C. rentals temporarily, the national leisure travel surge might have offset this weakness. Additionally, shutdowns often produce mixed effects, including increased one-way rentals as travelers substitute driving for flying.
At this point, the shutdown appears to be a localized and temporary headwind, not a thesis-breaking factor.
Risks and What I May Be Missing
Key risks to this thesis include:
- A renewed collapse in used-vehicle prices
- Aggressive price competition across the rental industry
- Sustained weakness in business and government travel
- Higher interest costs due to fleet financing
However, none of these risks currently outweigh the positive operational momentum. Hertz’s improved cost structure provides a margin of safety that did not exist in prior cycles.
TL, DR:
The used-car market was stable, the travel market was better than average, fleet utilization was strong, and depreciation is structurally lower due to retail vehicle sales and the Amazon partnership.
These factors support continued profitability. While short-term noise exists, the core earnings power of the business has improved materially. And a massive short position exists in HTZ. I was correct last quarter with depreciation per vehicle and the turnaround. Bad market sentiment prevented a massive short squeeze. That might not be the case this time around. If the Russell 2000 continues its assent in 2026 this stock could be a rocket ship if I am correct again. For these reasons, once again I am optimistic on HTZ.
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