Is Billionaire Bill Ackman Right Hertz Can Quintuple Its $1.7 Billion Market Cap by 2029?

Troubled rental car agency Hertz (NASDAQ:HTZ) was thrown a lifeline of sorts when billionaire investor Bill Ackman revealed his Pershing Square Capital Management hedge fund had acquired a 20% stake in the company worth $46.5 million.

In a post on X, Ackman said he assigned a “conservative” $30 per share valuation by 2029 on HTZ stock. With the rental company trading at $5.71 per share, for a $1.75 billion market cap, the day before his position was revealed, that suggests Hertz could trade at over $9 billion in four years. That would equate to HTZ stock more than quintupling in value.

The stock immediately rocketed to a 45% gain. HTZ now trades at $8.30 per share, for a $2.56 billion valuation. That means there is still 361% upside remaining and raises the question, what does Ackman see in Hertz that the rest of the market doesn’t?

Blue skies ahead

Ackman’s valuation is certainly ambitious. Using Hertz’s estimates of achieving $1,500 in revenue per unit, lower operating expenses, and improved fleet utilization rates, he believes the car rental agency can arrive at $2 billion in adjusted EBITDA.

By applying a 7.5x EBITDA multiple, which he considers conservative given industry norms, it results in a $15 billion enterprise value. Subtracting Hertz’s $12.5 billion debt, leaves the equity portion valued at approximately $2.5 billion. With 84 million shares outstanding, this translates to $30 per share, implying a near-36.5% compound annual growth rate over four years.

Considering the rental vehicle industry is an oligopoly dominated by Enterprise and followed by Avis Budget Group (NYSE:CAR) and Hertz, which account for 95% of the total market, the leader shows rentals can be a profitable business. Ackman estimates privately-held Enterprise has profit margins north of 20%.

Favorable tailwinds

Ackman’s optimism is grounded in favorable industry dynamics and Hertz’s operational improvements. Additionally, President Trump’s tariff proposals, potentially imposing 10% to 20% duties on auto imports, could raise used car prices by 10%, adding $1.2 billion to Hertz’s $12 billion fleet value, or nearly half its $2.66 billion market cap. 

Under recently appointed CEO Gil West, Hertz has already made strides in its turnaround. It is rotating its fleet to reduce depreciation costs, has liquidity of $1.5 billion, and debt that doesn’t mature until 2028 to 2029, giving it some financial breathing room.

In short, Ackman says his valuation is the culmination of several factors: 

• More rational competitive behavior regarding pricing, 
• Hertz putting its overexposure to electric vehicles in the rearview mirror,
• An operational turnaround plan under new management that has achieved success elsewhere, and
• Hertz’s leveraged capital structure enabling shareholders to generate very attractive ROI.

As exciting as the possibility is, achieving this $30 per share price tag faces significant challenges that investors need to seriously measure. 

High hurdles to surmount

Hertz reported a $2.9 billion loss in 2024, despite a $245 million hit from selling off its EV inventory the year before that did not recur last year. Given the rental company’s negative EBITDA of $357 million in the fourth quarter (albeit slightly lower than the $382 million loss in 2023) and its high debt load, it is a steep climb for HTZ stock to reach $30 a share. 

Wall Street is certainly skeptical. The average analyst one-year price target is just $4.12 per share, or 50% below where it trades today, and earlier this month Bank of America lowered its target to $2.70 per share, suggesting 67% downside. There is a strong sell rating on the stock.

Analysts point to Hertz persistent customer service issues and it has suffered a deterioration in brand equity over the years. Competition from Avis and Enterprise is no slouch either and further threatens Hertz’s ability to meet Ackman’s aggressive operational targets.

Moreover, while tariffs could boost used car prices, they may also dampen travel demand. 

Key takeaways

Ackman’s proposed partnership with Uber Technologies (NYSE:UBER) for an autonomous vehicle fleet, leveraging Hertz’s 500,000 vehicles, is intriguing but speculative, given regulatory and technological hurdles in AV adoption. And though Ackman’s big stake caused HTZ stock to soar, it reflects market hype, not Hertz’s lagging fundamentals. 

The bottom line is Hertz could benefit from industry trends and operational improvements, but $30 per share by 2029 appears overly optimistic. Persistent losses, competitive pressures, and financial strain suggest a more modest trajectory at best, making Ackman’s valuation a challenging goal to realize.

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