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Why Zipcar's Shares Got Crushed

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 pioneer Zipcar (Nasdaq: ZIP  ) skidded into a ditch today, falling as much as 39% in intraday trading after the company reported second-quarter results.

So what: Let's start with the good news. Zipcar's revenue grew 15% year over year to almost $71 million, driven by 21% growth in membership. The company also zoomed closer to profitability with a quarterly net loss of $422,000, versus $5.6 million last year.

Unfortunately, that wasn't good enough. Wall Street analysts had been expecting a breakeven quarter and $73 million in revenue, so, growth notwithstanding, the numbers from the second quarter were largely seen as a disappointment. What's worse is that the company admitted that it has had trouble attracting new members and faced headwinds in the U.K. arm of the business. Those struggles no doubt played a part in the company's more conservative third-quarter revenue outlook of $74 million-$77 million. The average analyst estimate for the upcoming quarter was $81.5 million.

Now what: For a young company like Zipcar, investors are looking for growth, growth, and more growth. As such, the admission that growth has been elusive is a troubling thing for them to hear. On the flip side, it's important to remember that Zipcar is a young company in a young industry, so it will be key for investors (if they want to stick around) to watch how the management team addresses the speed bumps the company has hit.

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.

Read/Post Comments (5) | Recommend This Article (7)

Comments from our Foolish Readers

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 August 03, 2012, at 3:36 PM, dbtuner wrote:

    ZIP plunged. Why? MF recommended it much higher. The pump didn't work

  • Report this Comment On August 03, 2012, at 6:51 PM, Pat4Ra wrote:

    So now what should invested MF members do? Buy some more? May be MDP should have an opinion.

  • Report this Comment On August 03, 2012, at 8:31 PM, BigSkyMT wrote:

    My take, a bump will come in relation to oil price increases. So, is the price of oil heading higher over the coming years or not?

  • Report this Comment On August 04, 2012, at 4:50 AM, francescac wrote:

    ZIP doesn' t make enough advertising. I leave in UK and know for certain that nobody knows about ZIP and how his concept works, there' s never an advert anywhere and when I suggest them to friends in need of it, they immediately becomes members.

    Otherways it would make a killing. It would be so popular. It is very much in sound with the british taste.

    My doughter, who leaves in USA, and has been there in college, has never, say never even considered to by a car on her own, she just use ZIP! And I suppose are doing so a very big number of young people.

    Why would ever consider to by a car in London, or in Oxford or... if you know about ZIP??

  • Report this Comment On August 05, 2012, at 1:29 PM, bretco wrote:

    Why, Oh why does it seem I awlays choose the MF's losers?

    This one is right there with Krispy Kreme, another

    "can"t lose" MF prime choice.

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Zipcar CAPS Rating: ****