It’s Time to Say Goodbye, as Hertz Shares Aren’t a Good Buy

The dream of multi-bagger returns just won’t die, will it? As some loyal (or perhaps stubborn) traders continue to invest in Hertz Global (OTCMKTS:HTZGQ), it’s becoming increasingly apparent that Hertz stock might never recover.

the front wheels of a series of cars in a line

Source: lumen-digital /

I can’t blame anyone for wanting to keep the dream alive. Heck, I’m as guilty as anyone — indeed, you might have read my bullish mid-December article on Hertz stock.

Back then, most people had never heard of r/WallStreetBets. The catch phrase in 2020 was “recovery trade,” and the fantasy of Hertz returning to its former glory seemed alive and well.

This year, it’s all about “meme stocks,” which is basically a way of saying joke stocks that traders might target for a short squeeze. Yet, unfortunately for the folks trying to parlay Hertz stock into a multi-bagger now, the joke might be on them.

A Closer Look at Hertz Stock

The so-called “bankruptcy trade” did actually work for a while with Hertz stock, I’ll admit. In early June, the share price got a quick pump from 82 cents to around $5.50.

However, after that pop came an inevitable drop. By the end of October, Hertz stock fell to 70 cents.

There has been a bit of a recovery, with Hertz stock closing at $1.86 on Feb. 24, 2021. Still, we need to put this seeming victory into perspective as shares spent much of 2018 and 2019 trading above $10.

Reaching and holding $5 would be a reasonable goal for the Hertz stock bulls if it weren’t for the company’s negative catalysts. The most obvious of these catalysts, of course, is bankruptcy.

Respecting the Retail Shareholders

Hertz famously filed for bankruptcy protection on May 22, 2020. This occurred during a time when the financial markets were just starting to recovery from the novel coronavirus pandemic.

Stunningly, Hertz soon afterwards announced it planned to sell $500 million worth of stock shares. The company even acknowledged that these shares could end up worthless for retail investors.

Thankfully, Hertz abandoned its plan to sell those new shares, but only after the U.S. Securities and Exchange Commission had begun to scrutinize the company.

It’s difficult for me to root for a company that isn’t looking after its retail shareholders. I’m also concerned about Hertz’s ability to cover its debts.

As InvestorPlace contributor Muslim Farooque calculated, Hertz at one point carried $6 billion in debt and $13.5 billion in third-party debt. Farooque also pointed out that the company was generating zero revenues.

And as I look through Hertz’s page of recent press releases, I’m not finding anything that would lead me to believe that the company is taking swift and strong action to turn itself around.

So far in 2021, the only press release is titled: “Hertz Offers Chance to Win Free Home and Car Cleaning for a Year.” That’s not what I was hoping to see.

No Memes Today, Thank You

There’s always the hope that the Reddit crowd will suddenly adopt Hertz stock as a meme stock. That would undoubtedly raise the share price, right?

Sure, but that’s not a real investing strategy.

No one outside of the r/WallStreetBets inner circle could possibly have predicted the astonishing short squeezes of GameStop (NYSE:GME), AMC Entertainment (NYSE:AMC), BlackBerry (NYSE:BB) and other stocks.

Besides, as we now know in hindsight, some of those meme stocks crashed as quickly as they ascended.

Hertz stock already had its irrational pop-and-drop last year. A sequel is certainly possible, but it’s not something that’s reliable or easy to time successfully.

The point is that trading meme stocks is not an easy thing to do. Perhaps the best policy is to stick to companies that aren’t under the same magnitude of financial pressure.

The Bottom Line on Hertz Stock

Maybe it’s been fun to watch Hertz fly and fall if you weren’t invested. If you had financial skin in the game, however, the joke probably wasn’t very funny.

Rather than try to time the market and flip Hertz shares for a profit, I would advise caution and a greater focus on companies that aren’t fraught with fiscal problems.

Just as importantly, I recommending sticking to companies that have more respect for the retail shareholders.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

Article printed from InvestorPlace Media,

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