Hertz (HTZ) Is Coming Back to Life. Short Sellers Are Feeling the Squeeze

Hertz (HTZ) has suddenly come back to life. After years of fleet problems, heavy losses, and a collapsing share price, investors are finally seeing signs of a real turnaround. Since closing at $1.51 on August 4, the stock has surged to around $2.8, an increase of roughly 87% in just over a week.

The move is being driven by two things at once. The car rental and mobility solutions provider’s Q2 results showed real improvement in fleet economics, while extremely high short interest has added fuel to the rally. With nearly 30% of shares outstanding recently sold short, the big question now is whether the squeeze still has room to run — or whether the stock has already moved too far, too fast.

That leaves me cautiously bullish on HTZ for now, as the turnaround looks increasingly real and the squeeze may still have room to run.

Real Turnaround with a Short Squeeze

There are two things happening at Hertz right now: a real operational turnaround and a short squeeze on top of it. I’ll focus more on the latter as I go through this article.

First, let’s look at the turnaround. Hertz went through a massive crisis in fleet economics. The most famous example was its heavy bet on Tesla (TSLA) electric vehicles (EVs). The residual value of those cars plunged, forcing Hertz to accelerate sales and recognize massive depreciation.

In Q2 2024, Hertz’s Depreciation Per Unit (DPU) reached $600 per month. Today, the target is around $300. On an annualized basis, that’s roughly $7,200 versus $3,600 per vehicle. This figure is essentially the “monthly cost of owning the car” from its loss in value. For a rental company, it’s one of the most important metrics in the business.

Imagine Hertz buys a car for $35,000 and expects to sell it two years later for $28,000. The car loses $7,000 in value over 24 months. That works out to roughly $292 in depreciation per month, close to Hertz’s $300 DPU target.

Now imagine Hertz buys the same car for $35,000 but later finds it can only sell it for $21,000. That would translate into a DPU of roughly $583 per month. That’s basically what happened to part of Hertz’s fleet.

Hertz’s Turnaround Is Showing Up in the Numbers

Hertz’s turnaround is now starting to show clearly in the numbers. In its Q2 earnings report released a few days ago, the business showed strong signs of improvement. Basically, it means fewer cars, higher revenue per car, better utilization, and DPU back near its target.

The company reported a 10% year-over-year increase in revenue even though its average fleet was 1% smaller. Revenue per day (RPD) grew 9% year-over-year. Utilization also rose to 79%, up 80 basis points. Adjusted EBITDA came in at $81 million, compared with just $18 million a year ago.

Even better was DPU, which came in at $302. That was practically in line with the company’s target. Meanwhile, 94% of the core U.S. fleet consists of 2025 or 2026 model-year vehicles.

Management is now targeting $225–$275 million in EBITDA for 2026. It also continues to discuss a figure close to $1 billion for 2027, along with positive earnings and FCF that year.

A Younger Fleet Gives Hertz More Flexibility

A younger fleet is also giving Hertz much more flexibility. In my view, this is one of the most bullish parts of the turnaround. Having 94% of the core U.S. fleet in 2025 or 2026 model-year vehicles shows that Hertz is finally moving past its legacy inventory problem.

Previously, the company had many cars that were bought at high prices and were aging. Some also had poor residual values, especially EVs. With a newer fleet bought under what appears to be a more disciplined strategy, Hertz has much more flexibility.

It no longer needs to desperately sell these cars. Instead, it can make better choices about when to rent them and when to sell them.

The Short Squeeze Still Has Plenty of Fuel

The short squeeze still appears to have plenty of fuel. While the Q2 figures help explain HTZ’s explosive move from a fundamentals perspective, there is also a very clear squeeze element behind it. As I write this, HTZ has a market cap of roughly $1.0 billion. So, if investors start to believe EBITDA can actually reach $1 billion, the equity becomes extremely sensitive to any change in expectations.

At the same time, nearly 30% of the shares outstanding were recently sold short. Any further confirmation that the turnaround is working could force short sellers to cover. That can sharply amplify the move. Hence the +20%, -20%, +30% swings, which clearly aren’t driven by fundamentals alone.

Even though HTZ has already climbed from $1.51 per share on August 4 to around $2.8 at the last check, I still see a very real chance of further short squeezes. The setup still looks pretty extreme. As of August 13, short sellers were paying a borrowing fee of 22.85% per year for HTZ. Only around 450,000 shares were available to borrow.

According to the latest exchange-reported data, as of July 31, there were 103.2 million shares sold short, up 5.8% from the previous report and equal to roughly 29% of shares outstanding. Short interest had also risen 5.8% from the previous report. Days-to-cover stood at roughly six days based on average volume at the time. Importantly, that was before the August 6 earnings report, which beat expectations and sent the stock soaring.

High Trading Volume Could Cool the Squeeze

While one might have previously argued that Hertz stock had very high short interest because its underlying business was imploding, Q2 made that narrative less obvious. This forces short sellers to reconsider not just the price, but the thesis itself.

Still, there’s one factor that could arguably reduce the squeeze’s impact: trading volume has skyrocketed. That is great for triggering a squeeze initially, but it also makes it easier for short sellers to cover their positions.

When more than 100 million shares are trading in a single day, that “six days to cover” figure becomes less meaningful. After all, it was calculated using the much lower average volume from before the rally.

Valuation Makes the Investment Case Trickier

From an investment perspective rather than a trading one, valuation gets a little trickier. Hertz screens as dirt cheap on equity-based metrics, trading at just 0.1x sales versus an industry average of 1.97x. However, that number only tells half the story.

The company still carries roughly $5.6 billion of net non-vehicle debt. That makes its current nearly $1 billion equity value highly sensitive to any change in earnings expectations.

That leverage cuts both ways. At a corporate enterprise value of roughly $6.7 billion, Hertz still looks expensive against its $225–$275 million 2026 EBITDA guidance. Yet if management gets anywhere close to its $1 billion 2027 EBITDA target, the picture changes quickly. HTZ’s EV/EBITDA would fall to roughly 6.7x.

Is HTZ a Buy, According to Wall Street?

The HTZ forecast on Wall Street remains bearish, with analysts giving the stock a Moderate Sell consensus rating. Of the seven ratings, four are Holds and three are Sells, with no Buys. The average Hertz price target is $2.25, implying roughly 19.6% downside from HTZ’s latest price.

HTZ Still Works Better as a Trade

From a trading perspective, I believe the HTZ rally still has fuel to keep going. Short interest remains extremely high, while the fundamentals have taken a meaningful step forward. That is enough for me to maintain a Buy rating in the short term. A doubling from the start of the rally, which would put HTZ around $3 per share, looks like a reasonable point to reassess the trade and potentially take profits.

That being said, HTZ remains a much tougher call from a long-term investing perspective. Leverage still takes a painful toll on the thesis, and I would need to see more execution before calling this a convincing structural turnaround.