3 Things Investors Should Know About the New Deal Between Amazon and Hertz

Hertz Global will begin selling thousands of its used rental cars on Amazon's new Amazon Autos beta site, becoming the platform's second merchant after Hyundai. This strategic collaboration allows customers to browse, finance, and purchase vehicles online for pickup at select Hertz Car Sales locations, expanding Amazon's nascent online auto sales presence and providing Hertz an additional channel for inventory disposal. While the initiative addresses consumer demand for broader selection and helps Hertz offload vehicles, the article notes it is unlikely to significantly impact Hertz's persistent unprofitability and substantial debt, though it further solidifies Amazon's role in the evolving online vehicle marketplace.

Analysis

Hertz Global (HTZ) is entering a partnership to sell used vehicles on Amazon's (AMZN) beta e-commerce site, Amazon Autos, becoming the platform's second merchant after Hyundai. This move provides Hertz with a significant new sales channel to offload a portion of its estimated 250,000 used cars for sale annually, leveraging Amazon's vast customer base. For Amazon, the addition of Hertz addresses direct customer feedback for more brand selection on its nascent auto platform, which has already shown early success with Hyundai by expanding from 48 to 130 U.S. cities. However, the financial implications for each company are highly asymmetrical. The partnership is unlikely to materially alter Hertz's precarious financial position, which is characterized by six consecutive unprofitable quarters and a net debt of $19.4 billion. Conversely, for the highly profitable Amazon, this represents a low-risk strategic expansion that enhances its marketplace ecosystem, with its strong financial standing likely affording it favorable terms in the arrangement.

Key Decisions for Investors

• Investors should view the Amazon partnership as insufficient to resolve Hertz's fundamental challenges, including persistent unprofitability and a $19.4 billion net debt burden, warranting continued caution on the stock.
• For Amazon, this deal is a minor strategic positive that reinforces its ability to enter and scale new verticals with minimal risk, but it is not expected to have a meaningful near-term impact on its overall financial results.
• The stark contrast in financial health and strategic benefit suggests that any investment thesis based on this partnership should overwhelmingly favor Amazon over Hertz, as the latter's deep-seated operational and balance sheet issues remain unaddressed.