UPDATE: Morgan Stanley Downgrades Hertz Global (HTZ) to Equalweight
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(Updated - November 15, 2016 1:01 PM EST)
Morgan Stanley downgraded Hertz Global (NYSE: HTZ) from Overweight to Equalweight with a price target of $30.00 (from $57.00). Analyst Adam Jonas said valuation appears full and noted that investor confidence in management has deteriorated.
"Our previous OW recommendation was driven in very large part by our belief that new management could stabilize the fleet management and revenue functions of the house while instilling a sense of urgency on cost cutting. Following HTZ’s 1/3 cut to FY guidance, the analyst call revealed to the market that the previous targets were set to aspirational levels with a lack of conservatism. Investor confidence matters in all environments, particularly for rental firms on >5x leverage heading into a used car downturn. HTZ management took personal responsibility for the guidance reset. While this is an important first step, we believe questions in confidence around the team's handle on internal cost drivers deserves further consideration," said Jonas.
The analyst added, "Time will tell if what happened in 3Q was merely a one-time blip on the road to a successful operational and strategic turnaround. However, we believe the volatility of potential equity outcomes that investors must contend with is also very high. HTZ is clearly a battleground stock. Taking the extreme ends of our Bull ($60) and Bear case ($5), we believe the market is applying roughly even odds on either outcome. We agree with the market's assessment as our $30 target (previously $57) offers only 7% upside with elevated risk."
Shares of Hertz Global closed at $28.00 yesterday.
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