The Next Zipcar
An Easy Double in 2 Months
Well, I was partly right..
Last year I wrote the following about the car sharing company Zipcar (NASDAQ: ZIP):
“... because Hertz and Enterprise are foaming at the mouth to tap the car sharing market, I wouldn't be surprised if one or both eventually made a bid for ZIP in a couple of years. Either way, I don't think Zipcar is under any serious threat in the near-term, and I may be looking to pick some up on dips.”
When I got to the office on Wednesday morning, I read the following headline:
Avis buying Zipcar in deal worth nearly $500 Million
OK, so I didn't nail it on which rental car behemoth would eventually acquire Zipcar — but I knew Zipcar was an early leader in a market that's destined to grow dramatically going forward, and that it was a prime target for acquisition.
About six months ago, a new study was released that suggested Millennials (those born sometime between the early 1980s and the mid 2000s), had become so neutral about driving that they were starting to represent one of the many factors behind slower auto sales growth.
That particular study followed a similar survey conducted by Deloitte in 2010 which found Millennials have different attitudes towards cars (different from those shared by many generations prior), and are more likely to take public transportation, bike, walk, or utilize car sharing services like car2go and Zipcar.
If you're a regular readers of these pages, you know I've been quite bullish on the car sharing market since around 2006, and I continue to believe this is a powerful new industry with a lot of robust growth ahead of it.
In fact, a Frost and Sullivan report found that car sharing networks increased 117% between 2007 and 2009 in North America. And within five years, 4.4 million people in North America and 5.5 million people in Europe are expected to sign up for car sharing services.
Of course, I'm not suggesting car sharing services will have a massive impact on individual car sales anytime soon, if ever... although it is likely that car manufacturers offering superior fuel economy will continue to find additional buyers in car sharing companies.
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The Next Zipcar
Because gas is often included with car sharing memberships, these services tend to seek out high-mpg vehicles. And increasingly, we're seeing these services focus their attention on hybrids and electric cars.
The latter made quite a spark back in March after Daimler's car2go registered 6,000 members for its electric car sharing program. Zipcar also placed some Toyota Plug-in Priuses in its Boston fleet, and recently introduced a few Chevy Volts in Chicago.
On the hybrid side, Zipcar currently has a ton of Honda Insights in its fleets, though I wouldn't be surprised to see a shift to the Prius or Ford hybrid models, now that Avis is behind the wheel. Avis currently rents the Toyota Prius and eight different Ford models. It also has no Hondas in its rental offerings.
But getting back to the recent Zipcar deal...
Avis agreed to to pay $12.25 per share to acquire the company.
That's almost a 50% premium to Zipcar's closing price the day before the deal was announced!
Those who picked up shares of ZIP near the bottom, which was around $6.00, are now sitting on gains in excess of 104%. Talk about a knockout score — and one of the fastest doubles I've ever seen inside of two months.
Not surprisingly, investors are now looking for the next Zipcar...
But unfortunately, there are none to be found. Zipcar was the only pure play on car sharing, and I don't expect to see another one again.
Zipcar boasted the lion's share of this market before the Avis deal. Now it's simply going to be unstoppable.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the managing editor of Energy and Capital and contributing analyst for the Energy Investor, an independent investment research service focusing primarily on stocks in the oil & gas, modern energy and infrastructure markets. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor''s page.