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Bear of the Day: Hertz (HTZ)

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With the market hitting all-time highs almost every day, there have been many sectors of the market that have been hot. The risk-on trade we’ve seen over the last few weeks has helped tech, energy, and other high beta names take off. So if you’re holding a stock in this hot market that hasn’t been performing, you should certainly take the time to reevaluate your position. One such position that you may want to reconsider is our Bear of the Day, Hertz Global Holdings (HTZ).

Hertz is a Zacks Rank #5 (Strong Sell) in the rental car business side of the business services industry that ranks in the bottom 28% of our Zacks Industry Rank. Hertz is a global brand that also owns Dollar Rent-A-Car, Thrifty Car Rental and Firefly Car Rental. The rental car company generates revenues from airport revenue, vehicle leasing, and the rental car leisure segment. Recently, Hertz has reorganized its corporate structure to separate the car business from its worldwide equipment rental business. That side of the business rents out heavy equipment for mostly industrial and construction usage.  

Analysts have been unimpressed by Hertz recently. Over the last 60 days four analysts have revised earnings to the downside for the current year and five have done so for next year. This has helped drop consensus from $2 to $1.80 for the current year and down from $2.55 to $2.22 next year.
After several years of steady growth year over year, the current reversal of that trend has helped to reverse the stock price as well. Take a quick look at the price and consensus chart for Hertz. You can see the slide in estimates beginning in summer of 2013. While these estimates have come down, the stock has yet to take as violent of a tumble.

The technical picture has changed drastically in the last two weeks. Since November 2013 Hertz had been on a very good run, adding on over 50% to its stock price in a just a few short months. Choppy price action saw it teeter between $25 and $30 on several occasions. It appeared to finally be breaking out above $30 before it got slapped down to $26.

Now you’ve got a stock on the wrong side of some key technical indicators. It’s trading well below the 25 day moving average shifted by 5 days (25x5) which is also very negatively sloped. The 25x5 up at $28.76 provides topside resistance for HTZ. There may be a small rebound to retest the gap down. Currently the stochastics are in a very oversold condition with the fast stochastic dropping all the way down to 10.4.

The recent gap down and sell-off took HTZ down to the 38.2% retracement of the move from November to June. This implies the 23.6% near $28 will provide heavy resistance. A failure at that price level brings the deeper retracement at $25.14 into sights.

Investors looking for an alternative in the space should consider rival Avis Budget Group (CAR - Free Report) . Avis carries a Zacks Rank #1 (Strong Buy).

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