Zipcar (ZIP.DL2) has been on a roll lately. The stock is up about 40% after announcing last month that 2012 should mark its first full year of profitability. Yes, that profit level will be tiny -- the company expects total net income of just $1 million to $4 million. But that's impressive nonetheless, given that Zipcar is still aggressively expanding its business.

And the car-sharing service collected some other trophies to put on its 2012 mantle.Those include:

  • Expanding its member base to nearly 800,000 -- up from 673,000 last year.
  • Growing revenue by 15%, and earnings to $0.10 a share in the third quarter.
  • Launching in Miami, the company's 20th major metropolitan market.

These positive results have helped the stock rebound from its lows. But investors are still looking at a 35% loss on the year. So Zipcar needs to notch a few key wins to help December's bounce become a long-term trend. Here are a couple of issues that I see the company needing to meet head-on.

Get a handle on new subscriber costs
Zipcar's member acquisition costs fell to $70 per subscriber in the third quarter. It's true that that figure is down from the $89 it cost to acquire each new subscriber in the second quarter. But the second-quarter costs were inflated by an expensive marketing experiment that was an absolute bust. Shareholders were cheered when last quarter reversed that awful trend. But the company's new member acquisition cost has been as low as $45. If Zipcar's loyal membership base is a real competitive advantage, then cheap, word-of-mouth marketing should help customer acquisition costs stay near historic lows, and not closer to new highs.

Management seems to have taken this lesson to heart, and the company is putting a new focus on generating referrals and using affiliate networking to boost subscriber rolls. Any success Zipcar has here would make funding its expansion plans that much easier.

Continue to innovate service options
Zipcar's best hope at fending off rising competition from the likes of Hertz (HTZG.Q) and Daimler's car2go service is to keep its own service fresh with continuous innovation. These competitors are mounting a serious challenge, after all. Hertz, for example, has the benefit of a huge fleet to draw from and is targeting many of the same densely populated markets. And the car2go business is an innovative spin on car sharing that has some real advantages over the Zipcar model. car2go allows members to leave their cars anywhere within a zone, instead of requiring that they return the vehicle to a single assigned space as Zipcar does.

But Zipcar can play the innovation game too. The company's cargo van lineup is a good recent example. After a limited test run in Seattle, Los Angeles, Philadelphia, and Portland, Ore., the profitable van service is being rolled out on a much larger scale. The company expects to have all the major markets in North America covered with cargo van service in 2013. Zipcar needs more improvements like these to keep the service a compelling value for new and existing members.

Pass 1 million members
And the reward for maintaining a great service should be record membership levels. Grabbing that millionth member next year would be a difficult but important milestone. And it wouldn't take crazy growth for Zipcar to get there in 2013. Membership levels that rose by just 6% sequentially each quarter would be enough to hit the figure by the fourth quarter of next year. Considering Zipcar grew its membership base by 5% from the second to the third quarter this year, that represents a bit of a stretch. Still, it's not out of the question for a company that has aggressive global growth plans. 

A winning investment?
But even if you don't think Zipcar will hit that ambitious target, the stock still could make for a solid investment for growth-minded investors who don't mind taking on some risk. Revenue growth has fallen, but seems to have leveled out at a solid 15%. Yet the stock is selling for just 1.25 times trailing revenue, which is close to an all-time low. With rising competition and an unproven business model, the company is far from a safe bet at this point. But it's not hard to see how 2013 could turn out to be a great year for the car-sharing pioneer.