It’s not just Ford Motor Company (NYSE: F)
and General Motors Company (NYSE: GM) that
could see major changes to their businesses at the dawn of the automated-vehicle era. According to new reports, car rental companies Avis Budget Group
Inc. (NASDAQ: CAR) and Hertz Global
Holdings, Inc (NYSE: HTZ) may be picking sides as they
position themselves for a driverless future.
Avis recently announced a multiyear partnership with Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG)’s Waymo driverless car unit. Bloomberg has also reported that Hertz is
working with Apple Inc. (NASDAQ: AAPL) to
test driverless car technology.
Though the partnerships will not have any meaningful immediate financial impact, they should come as welcome
news to Avis and Hertz investors, MKM Partners analyst Christopher Agnew says. These deals suggest rental companies have a
future in a driverless world and will not become obsolete within 5-10 years, Agnew says. Instead of rental car companies becoming
less relevant, he believes they will become even more relevant.
“We believe a large under-appreciated asset for the car rental companies are its fleet management and logistical capabilities as
well as its broad geographic footprint, particularly its airport locations,” Agnew wrote on Tuesday (see Agnew's track record
here).
“Between traditional on-airport car rental, off-airport rentals, car sharing (Zipcar, Enterprise Car share) and corporate fleet
management (Donlen and Enterprise Fleet Management), the car rental industry has broad expertise across different types of fleet
management.”
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Stocks In The Struggling Rental Car Sector Are Surging This Week
Agnew noted that Avis is also expected to begin a connected car pilot by the end of July as part of the company’s long-term
margin expansion initiative. The pilot is intended to help the company optimize a wide range of measures, including gas measurement
and preventative maintenance.
MKM maintains a Buy rating for Avis, Hertz and Alphabet with price targets of $40, $22 and $1170, respectively.
At last check, shares of Avis were down 6.14 percent at $25.97, while shares of Hertz were down 0.83 percent at $10.75.
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Image Credit: By Michael Rivera (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons
Latest Ratings for HTZ
Date |
Firm |
Action |
From |
To |
Feb 2017 |
Credit Suisse |
Downgrades |
Neutral |
Underperform |
Nov 2016 |
Morgan Stanley |
Downgrades |
Overweight |
Equal-Weight |
Nov 2016 |
Northcoast Research |
Downgrades |
Buy |
Neutral |
View More Analyst Ratings for
HTZ
View the Latest Analyst Ratings
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