Level 7 Business Management SL IA (IB), Monografías, Ensayos de Economía de la Empresa

¡Descarga Level 7 Business Management SL IA (IB) y más Monografías, Ensayos en PDF de Economía de la Empresa solo en Docsity! Is Hertz Global Holdings Inc. $4.2 billion TESLA order a good financial investment? Date: 12/12/2021 Business Management SL Candidate code: Word count: 1491 Table of contents: Introduction 3 Main body 4 Market Share: 4 Ratio analysis: 5 Ansoff matrix: 6 Investment appraisal: 7 Conclusion 8 Bibliography 9 Appendix 11 2 200,000 cars during its bankruptcy10 and Teslas now consist of 20%11 of Hertz’s fleet, this could negatively impact the company financially and risk their liquidity position worsening from which they just recovered. Therefore, a continuous PEST check for social and economical external factors would be advisable. Ratio analysis: Current ratio measures a company’s liquidity performance, while NPM measures a company’s profitability after taking away costs, overheads, interest and tax. The debt-to-equity ratio of the company is also evaluated to measure how much debt Hertz is carrying compared to the amount invested by its owners. 6 months ended 30 June 2021 2020 (ttm12) 2019 (ttm) 2020 Competitor Avis Budget Group (ttm)13 Current ratio14 2.51 0.86 0.75 0.874 Net Profit Margin (NPM)15 0.66% (32.60)% (0.59)% (12.7)% Debt-to-Equity ratio16 2.76 300.3 12.9 (71.4) (NPM and D/E for Hertz calculated from supporting documents) Looking at Hertz financial performance over the last 3 years, we can see that 2021 has been the most liquid year in comparison to 2020 and 2019, as the ratio stands 2.51:1, meaning they can easily pay their current liabilities and are in a great position to invest in growth opportunities; such as EVs. This is primarily due to Hertz’s new owners to bring the company out of 16 Supporting document 4 15 Supporting document 4 14 Supporting document 5 13 Supporting document 4 12 ttm → trailing twelve months 11 Supporting document 3 10 Shibu, 2020 5 bankruptcy.17 Moreover, Hertz’s NPM is negative in 2019 and 2020, which shows a decrease in revenues due to the pandemic. Nevertheless, 2021, has barely turned positive, suggesting the company has started having a profitable performance of 0.66%, meaning that for every dollar of revenue Hertz earns $0.66 in profit. This will most probably increase during the upcoming year. Their debt-to-equity ratio - a measure of financial health - has decreased significantly in comparison to 2020 when Hertz was financed mostly through borrowing. In comparison to its competitor, Avis Budget Group, we are able to see that although they did not file for bankruptcy, their figures demonstrate negative profit. This shows that all the industry suffered from the pandemic. Therefore, looking at these results and thanks to the $6 billion investment on Hertz18, nothing suggests the company will be at the brink of bankruptcy again. However, this will depend on the success of the Tesla's in penetrating the car rental industry amongst other factors. Ansoff matrix: Hertz, according to Ansoff’s Matrix demonstrated in Figure 2, would be attempting Product Development as they will be entering with a ‘new’ product in an existing market. Product Development is a moderate risk strategy that requires a large start-up capital, which Hertz has acquired from their new owner’s. If they succeed, it will provide them with a head-start in autonomous cars and electric vehicles which puts Hertz in a competitive advantage and could increase its market share of 13% (2020)19 which dropped drastically with the bankruptcy announcement. 19 Calculated from Supporting document 4 & Statista, 2020 18 Supporting document 1 17 Hertz Global Holdings Inc. Hertz Newsroom, 2021. 6 Figure 2. Diagram of the Ansoff Matrix.20 Financial analyst, Warren Redlich, considers that Hertz will become more valuable once their autonomous fleet is in action.21 Just since they announced their EV investment, Hertz’s shares have surged by more than 10%.22 Other companies will need to take on similar investments if they want to remain competitive in a world moving towards sustainability. Investment appraisal: Nevertheless, a $4.2 billion investment for a company struggling financially just a few months ago is incredibly risky. It is estimated that Hertz will make $3 billion of net profit a year, considering no future COVID-19 restrictions.23 Using this figure and assuming 20% will come from EV sales in an ‘ideal’ situation, we are able to calculate the payback period: years4,200,000,000 600,000,000 = 7 It should be noted that it is probable that Hertz will use other retained earnings to pay for this cost, making the payback period shorter. However, if we also consider other costs such as employee training for these vehicles and the costs associated with setting up its own charging 23 Supporting document 3 22 Google Finance, 2021 21 Supporting document 3 20 Oxford, n.d 7 Bibliography Augusta Saraiva, The Detroit News. (2021, October 26). Everything you need to know about renting a Tesla at Hertz. Bloomberg. https://eu.detroitnews.com/story/business/autos/2021/10/26/everything-you-need-know-renting-t esla-hertz/8547793002/ Ferris, R. (2020, August 17). Why Hertz landed in bankruptcy court when its rivals didn’t. CNBC. Retrieved October 26, 2021, from https://www.cnbc.com/2020/08/17/why-hertz-landed-in-bankruptcy-court-when-its-rivals-didnt.h tml Google Finance. (2021). Hertz Global Holdings Inc (HTZZ) Stock Price & News. https://www.google.com/finance/quote/HTZZ:OTCMKTS?sa=X&ved=2ahUKEwjf5fO4gfXzAh UD_RQKHQrnAEUQ3ecFegQIDBAe Hertz Global Holdings Inc. (2021, June 30). Hertz Exits Chapter 11 As A Much Stronger Company. Hertz Newsroom. https://newsroom.hertz.com/2021-06-30-Hertz-Exits-Chapter-11-As-A-Much-Stronger-Company Maxfield, J. (2018, October 3). Surprising Facts About the Rental Car Industry. The Motley Fool. https://www.fool.com/investing/general/2012/07/13/surprising-facts-about-the-rental-car-industr y.aspx 10 Oxford College of Marketing. (n.d.). Using The Ansoff Matrix to Develop Marketing Strategy. https://www.google.com/url?sa=i&url=https%3A%2F%2Fblog.oxfordcollegeofmarketing.com% 2F2016%2F08%2F01%2Fusing-ansoff-matrix-develop-marketing-strategy%2F&psig=AOvVaw 173IfGTaOp4EgSZp00OreU&ust=1635777920156000&source=images&cd=vfe&ved=0CAsQj RxqFwoTCMDC1ePx9PMCFQAAAAAdAAAAABAP Shibu, S. (2020, July 1). 29% of Hertz's cars have been sold already, as the company sits $17 billion in debt. The Business of Business. https://www.businessofbusiness.com/articles/hertz-sells-stock-and-cars-following-bankruptcy-fili ng/ Statista. (2020, November 10). Car Rentals market - Revenue forecast worldwide 2017 - 2025. https://www.statista.com/forecasts/891221/revenue-in-the-car-rentals-market-worldwide The Hertz Corporation. (2020). About Hertz. Hertz. Retrieved October 26, 2021, from https://ir.hertz.com/company-overview Wayland, M. (2021, October 6). Shares of Hertz jump after appointment of ex-Ford CEO Mark Fields as interim CEO. CNBC. Retrieved October 26, 2021, from https://www.cnbc.com/2021/10/05/hertz-names-ex-ford-ceo-mark-fields-as-interim-ceo.html 11 Appendix 1) Revenue in the Car Rentals market worldwide from 2017 to 2025, (in million U.S. dollars) Source: Statista, 2020. 12 It's the single-largest purchase ever for electric vehicles, or EVs, and represents about $4.2 billion of revenue for Tesla, according to people familiar with the matter who declined to be identified because the information is private. While car-rental companies typically demand big discounts from automakers, the size of the order implies that Hertz is Paying close to list prices. part of our strategy,” Mark Fields, who joined Hertz as interim chief executive officer earlier this month, said in an interview. “Tesla is the only Advertisement Expert insight into the future of cars Get Bloomberg.com's Hyperdrive newsletter. [Bloomberg may send me offers and promotions. By submitting my information, | agree to the Privacy Policy and Terms of Service. initiative since emerging from bankruptey in June. And it signals that Hertz's new owners, Knighthead Capital Management and Certares Management, are intent on shaking up an industry dominated by a handful of large players who are typically slow to change. Tesla's shares climbed 13%, the biggest one-day gain since March 9, to a companies with valuations above $1 trillion. Hertz, which currently trades over the counter ahead of its relisting on the Nasdaq Stock Market, surged 10% to $27.17. READ MORE: Hertz Stock Jumps After Tapping Ex-Ford Head as Interim CEO More from By locking up so much of Tesla's production - the ON orderis equivalent to about one-tenth of what the automaker can currently produce in a year - Drivers Are Hertz may box out rivals from copycatting the Interested in Electric Cars. Dealers strategy. Hertz also is breaking with tradition by Don't Know Howto | paying full price for wellappointed cars rather Sell Them : he Ai than the typical base-model, heavily discounted Tesla to Get Boost sedans that populate rental lots. From Jaguar Land Rover Emissions Pact The discussions with Tesla go back months, to oa ue Fosa when Knighthead and Certares were putting Up Tesla's Share together an offer for then-bankrupt Hertz, Fields Surge ____ | said. Also, therelationship between the two Tesla's $1 Trillion companies isn't exclusive: Hertz can buy EVs Valuation Belies Revenue Position from other automakers and rival car-rental companies can order from Tesla, provided it has available capacity. “We want to work with every manufacturer to help them launch EVs and drive this secular shift to electrification,” Fields said in the interview. Palo Alto, California-based Tesla, which is moving its headquarters to Texas, didn't reply to a request for comment. A Tesla Model 3 at a Tesla Supercharger station in Kettleman City, California. Photographer: Patrick T. Fallon/Bloomberg Tom Brady Teslas, with zero tailpipe emissions, will appeal to rental customers who want a green option or those eager to try out a battery-powered vehicle. Hertz said it hired Tom Brady, the seven-time Super Bowl-winning quarterback, to star in ads showcasing the new Teslas. It also created a dedicated EV website offering free charging through the end of January. - Hertz October GOAT's recognize GOAT's. Introducing our all new EV (GOHertz)25, 2021 SUPPORTING DOCUMENT 2 Fortune Business Insights. (2020). Car Rental Market Size, Share & COVID-19 Impact Analysis, By Vehicle Type (Luxury Cars, Executive Cars, Economy Cars, SUVs, and MUVs), By Application Type (Local Usage, Airport Transport, Outstation and Others), By Rental Duration Type (Short-Term, Long-Term), and Regional Forecast, 2020–2027. https://www.fortunebusinessinsights.com/car-rental-market-105117 SUPPORTING DOCUMENT 3 Johnson, J. (2021, October 25). Hertz Buying Vehicles From Tesla Is Much Bigger Than You Think. Torque News. https://www.torquenews.com/14335/hertz-buying-vehicles-tesla-much-bigger-you-think Tesla and Hertz are in the news with a reported deal for Hertz to buy 100,000 Model 3 vehicles from Tesla by the end of 2022. This is huge and Tesla has never had such a large number of orders from a single source. From a stock perspective, this will nudge Tesla slightly higher in 2022 by around $1 of E.P.S., according to financial analyst, Gary Black, and Warren Redlich thinks the real strategic move here is robotaxis, and Hertz placing themselves ahead of the competition by being able to awaken this fleet of vehicles when Tesla solves autonomy. Let's dive into the impact of autonomy and what this means for Tesla, Hertz, and individual Tesla owners. The Future of Autonomy and Why That Is Important In This Deal Tesla - Hertz Deal Bigger Than You Think. Ver máaul SET He 5114 With this deal, Hertz now becomes the 2nd largest robotaxi operator. There is a question if robotaxi and level 4/5 autonomy will happen. Warren Redlich is confident that Tesla will nail FSD (full self-driving) by the end of 2023. | think this is an accurate timeline and is in line with what | think. If FSD is solved by the end of 2023, which 1 believe it will be, Warren makes a very good point and says that if those 100,000 Model 3 vehicles were sold to individual owners, then those individual owners may not all use FSD and operate their vehicles as a robotaxi. This will be less profit for Tesla than what Hertz is going to do with them. With Hertz using all 100,000 vehicles as robotaxis and operating them 18 hours a day, that will be much more use than individual people using these vehicles. Tesla is very happy to make a deal with Hertz here because of the amount of use Hertz will give the vehicles as opposed to individual owners. Warren also comments that Hertz will become a much more valuable company with this deal and operating those 100,000 vehicles as robotaxis. Though not financial advice, he thinks Hertz can 4x in the next few years at a 20 P/E ratio if FSD gets solved and the company makes 3 billion dollars a year in gross profit from its autonomous fleet: This is good for Hertz and Tesla. Hertz is in a great position. All Tesla has to do is solve autonomy and in an instant, Hertz has 100,000 autonomous taxis that are much more price competitive than Uber and Lyft! 2021: Hertz Global Holdings Inc. (2021, August). 2021-08-09-Hertz-Global-Holdings-Reports-Strong-Second-Quarter-2021-Financial-Results .pdf. https://ir.hertz.com/financials#:~:text=%E2%96%BA-,Second,-Quarter%202021 Avis Budget Group 2019 financial ratios: Macrotrends. (2005–2021). Avis Budget Financial Ratios for Analysis 2005–2021 | CAR [Dataset]. Avis Budget Financial Ratios for Analysis 2005–2021 | CAR. https://www.macrotrends.net/stocks/charts/CAR/avis-budget/financial-ratios?freq=A SUPPORTING DOCUMENT 5 WSJ MARKETS. (2021). Hertz Global Holdings Inc. Balance Sheet. https://www.wsj.com/market-data/quotes/HTZZ/financials/quarter/balance-sheet Below I present the financial information selected in the form of screenshots, therefore no highlighting was necessary.