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Hertz Global Holdings Inc (HTZ) - Get Hertz Global Holdings Inc Report stock plummeted over 20% on double its 30-day average trading volume on Monday after Barclays analysts concerned with used car values and weak rental car pricing downgraded the rental car company.

Barclays said the combination of company-specific and industry-wide issues have created the "perfect storm" for Hertz.

Hertz's mounting challenges in earnings recovery and structural issues could have a binary effect on industry peer Avis Budget Group Inc (CAR) - Get Avis Budget Group, Inc. Report .

Barclays downgraded Hertz to "underweight" from "equal weight" with a $9 price target. Avis remains at an "equal weight" rating at Barclays, with a $32 price target.

Analysts said Hertz fundamentals have bottomed out, barring an economic downturn or auto industry shock. But the stock has jumped in the past five weeks on some positive data points and technical dynamics.

Barclays said this stock run-up ignores challenges in earnings recovery and will likely come to a quick halt with second quarter earnings acting as a negative catalyst when reported August 8.

Earnings growth is set to be "limited," with Hertz unlikely to bring down its fleet cost any time soon. As the company adds more SUVs, they ratchet up absolute depreciation within the fleet.

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Excess competition and company management's commitment to investing in service suggests terminal Ebitda doesn't support Hertz's stock price.

New car sales into the rental industry were down 20% year-over-year and June pricing could be significantly better than it was in 2016, suggesting Hertz is tightening its fleet capacity. But even then, Barclays wrote, the rental industry faces structural challenges as pricing is weighed down by fleet costs and ride-hailing services such as Uber limit the upside of stock peaks.

There's a lot riding on Hertz's second quarter financial results. Barclays thinks Avis could see a binary reaction, depending on Hertz's price commentary and extent of guidance cuts.

Hertz and Avis are the two rental industry players most exposed to fluctuations in used car pricing, Barclays wrote. A mid-March renewal of fear about U.S. used car pricing sent the NADA Used Car Index down 7%, suggesting the two rental companies could continue to sharply underperform the market into the second quarter.

The most important call in the second quarter earnings will be commentary on how the third quarter is tracking, though, Barclays analysts said. The make-or-break third quarter will be a better determinant of fiscal year earnings for both Hertz and the broader industry, as investors have "accepted for some time" that overly loose fleets skewed second quarter rental earnings.

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