Zipcar’s Growth Still in the Fast Lane Despite New Competition

by Trefis Team
-14.41%
Downside
12.25
Market
10.48
Trefis
ZIP
Zipcar
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Zipcar (NYSE:ZIP), the world’s leading car sharing network, has announced that it will host a teleconference to discuss the company’s 2011 third quarter financial results on November 2, 2011. Zipcar went public in April 2011 and has thrown a monkey wrench in the traditional car rental business over the last few years hampering companies like Hertz (NYSE:HTZ) and Avis (NYSE:CAR).

The company has yet to post profits but has witnessed steep top-line growth with rising membership and improving operating margins over the past few years serving now over 600K members with a fleet of over 8K vehicles. Aside from competing with traditional rental companies and car sharing services like Connect by Hertz, Enterprise’s WeCar, UHaul’s UCarShare and City Car Share, it now also faces competition from up and coming low-cost, peer-to-peer (P2P) car sharing services like RelayRides and GetAround.

See our note titled Zipcar Faces More Peer-to-Peer Car Sharing Companies, But Still Good for $27

See our complete analysis for Zipcar’s stock.

So far, Zipcar has seen a healthy trend in annual membership from its North American market, doubling from 200K members in 2008 to 400K in 2010. With an impressive 30% membership growth last quarter, it now exceeds half million members in North America. More than 10 million drivers live within a 10 minutes distance of a Zipcar location, indicating the potential of much greater penetration levels as the popularity of car sharing rises.

We are also optimistic about the improvement in operating margins over the coming years as Zipcar transitions from leasing its vehicles to purchasing them and as revenue mix shifts towards higher membership fee. (To read more - Zipcar’s Shifting Profit Margins to Higher Gear)

We have a price estimate of $27 for Zipcar, about 60% ahead of the market price.

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