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NEW YORK (
U.S. expansion in 2011 focused mainly on universities and college campuses.
The company says that 18- to-34 year olds represent its most important market and hold the key to Zipcar's popularity and the overall expansion of the car-sharing market. From tying up with Ford to launching the Facebook app and investing in the college P2P car-sharing Wheelz, Zipcar is pulling out all the stops to become the favorite among young drivers.
Zipcar is a membership-based car sharing company that serves over 673,000 members with a fleet of over 9,000 vehicles in North America and Europe. The membership grew by 25% in 2011, leading to 30% higher revenues compared to the previous year and its
first two profitable quarters over the second half of 2011.
In addition to cmpeting with traditional rental companies and car-sharing services like Connect by Hertz, Enterprise's WeCar, UHaul's UCarShare and City Car Share, it also faces competition from new low-cost, peer-to-peer (P2P) car sharing services like RelayRides and GetAround.
See our full analysis of Zipcar
The "millennials" are Zipcar's most popular patrons. The company recently conducted a study that revealed the segment of 18- to 34-year- olds (who form a quarter of the U.S. population) are the most important market for the car-sharing company and already constitute more than half of Zipcar's membership base.
The study, which examined the young generation's attitudes toward personal transportation and car ownership, found them to be increasingly adoptive of collaborative consumption. The younger generation today increasingly values access to cars over personal ownership. Millennials are strong adopters of car-sharing, making them the most lucrative and influential market segment for Zipcar.
Last year Zipcar expanded its University Program, adding services in 40 new college campuses, reaching a total 250 institutions nationwide. In late August,
Zipcar also tied up with Ford in a two-year partnership, making it the largest automotive source for its University Program.
College and university campuses serve as significant markets for Zipcar as students are more likely to look for alternatives to personal car ownership than any other demographic group. Renting cars to students also constitute a long-term marketing strategy to build the network out. Students using Zipcars while in college are more likely to subscribe to Zipcar car-sharing against car ownership when they enter jobs.
It recently invested in the first peer-to-peer (P2P) car-sharing company targeting college campus communities, Wheelz, acknowledging the potential of P2P sharing in contributing to the expansion of the overall car-sharing market. Zipcar has vast experience in operating car-sharing programs in college campuses across the U.S., and together with Wheelz, it can tap the growing popularity of P2P car-sharing on campuses.
Last year, Zipcar also launched a Facebook application "Reserve a Zipcar" allowing its members to book Zipcars or modify and cancel reservations directly through Facebook. It is estimated that 88% Zipcar users are also Facebook users who spend roughly 15 hours a day on the social network, a large proportion of which are young college students. The newly launched Facebook app has thus made car-sharing more accessible to the college communities.
We currently estimate Zipcar membership in North America can reach 1.9 million by the end of the Trefis forecast period. However, there could be a 20% downside to the Trefis price estimate if the market growth is slower and Zipcar membership in North America manages to reach just 1.5 million by the end our forecast period. Drag the trend-line to understand the impact of membership growth trends on Zipcar's stock price.
We have a
$22 Trefis price estimate for Zipcar, which implies a premium of 50% to the current market price.
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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.