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
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