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Why Hertz Global Stock Popped 9% Today

Car rental sign pointing up

What happened

Shares of car rental company Hertz Global Holdings (NYSE: HTZ) leapt in Monday trading and finished the day up just shy of 9%.

That's probably a reaction -- and a logical reaction, too -- to news that this morning Goldman Sachs upgraded shares of Hertz rival Avis Budget Group (NASDAQ: CAR) . In a note today, Goldman reversed course on Avis , upgraded the shares, and raised its price target to $35.

Goldman explained that one thing it likes about Avis is that it expects Avis to reap better prices when it rotates older cars out of its fleet and sells them outright, because car manufacturers are keeping a tight rein on sales incentives, and thus putting less pricing pressure on Avis.

Car rental sign pointing up

Car-renter Avis stock went up. Why shouldn't Hertz stock go up as well? Image source: Getty Images.

So what

Now, it might seem logical to assume that this trend would benefit Hertz just as much as it benefits Avis. Furthermore, with Hertz shares selling for 2.9 times trailing earnings currently, versus 6.1 times earnings for Avis, it might seem logical for investors who like Avis to like Hertz even more.

But Goldman does not see things this way.

To the contrary, the analyst stated straight out that it thinks Avis is better positioned than Hertz. Furthermore, despite upgrading Avis to "buy," Goldman left its rating on Hertz unchanged at "sell." And given that Hertz carries even more debt than Avis, and on a smaller market cap to boot, I'm inclined to agree with that decision.

Now what

I'm not sure investors who bid up Hertz shares in response to today's Avis upgrade realize all of this, however. Once they do, I wouldn't be a bit surprised to see Hertz shares fall back down just as quickly as they rose up today.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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