Zipcar Udpates: Hitting the Streets of Los Angeles

Zipcar (NYSE:ZIP), the world’s leading car sharing network, is expected to launch itself in Los Angeles market this week, making it the car sharing network’s 16th market, apart from its University Program that covers 250+ colleges campuses. It also recently announced its 3Q results and posted its first ever quarterly profit, riding on healthy membership growth of 25%. It will soon be presenting at two upcoming conferences, 8th Annual Citi US Small/Mid Cap Conference in Las Vegas on Nov 15 and J.P. Morgan 10th Annual SMid Cap Conference in New York City on Dec 1.

See our complete analysis for Zipcar’s stock.

Launches into Los Angeles

Zipcar is all set to launch into Los Angeles, making it the car sharing service Zipcar’s 16th market. Zipcar’s business model has demonstrated impressive profitability in its large and established metropolitan markets of Boston, New York City, San Francisco and Washington that have witnessed immense popularity of car sharing over the past few years. In 2010, these markets generated 60% revenue and enjoyed pretax margins of 21%. Its revenue grew further by 20-25% during the first half of 2011 with around a 30% increase in EBITDA margin. We expect Zipcar’s Los Angeles operations to be similarly profitable as the market reaches maturity.

Completes StreetCar Acquisition

Zipcar recently announced the completion of integration of Streetcar car club in London, ahead of schedule. This will provide Zipcar and ex-Sreetcar members in London seamless access to more than 1,700 vehicles across London. StreetCar members have been assigned Zipcar accounts who can register themselves on the website to activate their Zipcards. Zipcar began its acquisition of Streetcar in April 2010, pending approval by the UK Competition Commissioner, that was obtained in December 2010. This acquisition has prepared a solid base for Zipcar for further expansion in new European markets of France, UK, Germany. Frost & Sullivan research estimates the European car sharing market to surpass 5.5 million members and 3 billion euros by 2016.

3Q Recap

Last quarter, Zipcar posted its first ever quarterly profit, riding on healthy membership growth of 25% that has now reached 650K. The key cost performance metric, usage revenue per vehicle per day increased 8% to $65 from $60 in the prior year period. Although fleet operation costs remained higher, it was largely due to fleet expansion into new campuses and is expected to go down as a % of revenue as penetration levels improve. Read more – Zipcar’s Reports First Quarterly Profit en Route to $25, Market Still Unsure.

We have a price estimate of $25.64 for Zipcar, about 45% ahead of the market price.