Shares of Zipcar (Nasdaq: ZIP ) reversed their way out of the single digits today.
A strong move up yesterday on no material news was vindicated this morning when Morgan Stanley initiated coverage of Avis Budget (Nasdaq: CAR ) , Hertz Global (NYSE: HTZ ) , and Zipcar with overweight ratings.
Fans of the auto-sharing service would normally object to being lumped into the same group as traditional car rental agencies, but there's no point in looking a gift horse in the mouth.
Besides, Hertz and Avis have been making inroads into Zipcar's auto-sharing turf.
Hertz turned heads when it decided to stop charging annual fees for its Zipcar knockoff. It then began offering one-way rentals, which is something that Zipcar is monitoring. Enterprise Holdings -- the company behind Enterprise, National, and Alamo -- acquired Mint Cars On-Demand last week, a small auto-sharing service with 8,000 members. Avis began testing a car-sharing platform with its corporate fleet last year, and if that pans out there's little to stop the company from introducing a similar consumer-facing service.
Yes, Zipcar's coming off a disappointing quarter, though it's hard to call a 20% increase in revenue problematic. There are now 709,000 Zipsters renting cars by the hour or day with gas and insurance included, and that's 23% more users than the service had a year earlier. This doesn't seem like a service that's declining in popularity just because an old-school agency is giving away memberships.
Zipcar's guidance calls for a healthy profit on a 20% to 22% revenue growth spurt, so it doesn't see its growth rate decelerating for the balance of the year -- though that's not the case for the current quarter when Zipcar's banking on 15% to 20% in top-line growth.
Even the threat of peer-to-peer sharing -- a consumer-to-consumer niche that General Motors (NYSE: GM ) validated after striking a deal with RelayRides to let all OnStar-equipped vehicles seamlessly participate in the program -- isn't apparently forcing Zipcar into a detour.
Morgan Stanley's simply capitalizing on the opportunity to initiate coverage for a dynamic growth company that just happens to be fetching a little more than half of last year's IPO. Well played.
Shifting into gear
Zipcar has had engine problems since being recommended to Rule Breakers subscribers shortly after last year's IPO, but the growth stock newsletter service has identified what it believes is the next rule-breaking multibagger. The report is completely free, so check it out now.