Zipcar (NYSE:ZIP) recently expanded its University Program, adding services to two new campuses and appointed a new President for Zipcar Europe to implement and oversee the company’s planned growth strategy in Europe after integrating London’s Streetcar and acquiring a majority ownership interest in Barcelona’s Avancar. Even though the car sharing company is likely to continue to post a loss in 2011, we expect the company to have strong top-line growth and approach profitability as its markets mature. Zipcar competes with traditional car-rental companies like Hertz Global Holdings (NYSE:HTZ), Avis Budget Group (NYSE:CAR) and car sharing services like Connect by Hertz, Enterprise’s WeCar, UHaul’s UCarShare and City Car Share.
Deepening Presence in Europe and U.S. Campuses
Building a solid base for European expansion with the integration of Streetcar car club in London and the recent purchase of a majority ownership interest in Barcelona’s Avancar, Zipcar has now appointed Ferek-Malte Feller as its first president of Zipcar Europe to implement and oversee the company’s planned growth strategy in Europe. Through such acquisitions, JVs, franchise opportunities and organic growth, Zipcar targets to capture a major chunk of the European car sharing market that could exceed 3 billion euros over the next decade. We wrote more about it in a recent article.
It also recently entered University of Missouri-Kansas City and Rockhurst campuses. Zipcar’s expanded University Program now serves more than 250 institutions nationwide. Zipcar also tied up with Ford in a two-year partnership last year, making it the largest automotive source for its University Program. Zipcar’s recent study revealed the “millennials” (18-34 year olds) as its most popular patrons that constitute more than half of Zipcar’s membership base, which also makes college and university campuses significant markets and marketing platforms for Zipcar.
Car sharing is a highly capital intensive business with low margins and Zipcar had accumulated losses of $65 million by 2010. However, the company’s top-line grew at over 40% in 2010 and is expected to have grown by 30% in 2011. The business model has demonstrated profitability in its established markets of Boston, New York City, San Francisco and Washington and we expect it to become impressively profitable as the company reaches maturity in other markets and increases its penetration in its primary markets.
We expect the car sharing market to exceed $10 billion global market size by 2020, and Zipcar is currently the leading market player in the segment with first-mover advantage and significant brand cache.
We have a price estimate of $25 for Zipcar.