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Why Zipcar's Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of car-sharing-service pioneer Zipcar (Nasdaq: ZIP  ) were zipping in reverse today, falling as much as 13% in intraday trading after the company reported first-quarter results.

So what: For the quarter, Zipcar managed 20% year-over-year growth in revenue, to $59 million, which was roughly in line with what Wall Street analysts were expecting. On the bottom line, the company significantly improved on the $0.95 per-share loss of last year, losing just $0.08 this time around. Analysts had estimated that the company would lose $0.10 per share. The growth was driven by a 23% jump in membership and the company boasted more than 709,000 members at the end of the quarter.

That all sounds pretty good so far, right?

Now what: For a stock with an exciting story like Zipcar, early investors are going to be looking for growth -- and lots of it. To be sure, the company continues to grow nicely and it's projecting a full-year profit, but it looks like that profit will miss what Wall Street was hoping for. With projected full-year profit of $3 million-$7 million, the midpoint earnings-per-share forecast would fall at around $0.125. Current estimates were looking for $0.14.

This isn't good news, but it's also hardly the end of the world for Zipcar or its investors. If Zipcar is able to deliver on the long-term promise that it's gunning for, the payoff for investors isn't in a couple pennies in earnings per share this year. Rather, it's about the execution by the company and the development of this segment of the car-rental market in the years ahead.

Want to keep up to date on Zipcar? Add it to your watchlist.

The Motley Fool owns shares of Zipcar. Motley Fool newsletter services have recommended buying shares of Zipcar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 25, 2012, at 2:38 PM, dbtuner wrote:

    IF you like this segment, buy IDSY instead. They power the Avis car sharing solution

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Zipcar CAPS Rating: ****