Why Zipcar's Shares Got Crushed
Aug 3rd 2012 3:26PM
Updated Aug 3rd 2012 3:54PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of car-sharing pioneer Zipcar (NAS: ZIP) skidded into a ditch today, falling as much as 39% in intraday trading after the company reported second-quarter results.
So what: Let's start with the good news. Zipcar's revenue grew 15% year over year to almost $71 million, driven by 21% growth in membership. The company also zoomed closer to profitability with a quarterly net loss of $422,000, versus $5.6 million last year.
Unfortunately, that wasn't good enough. Wall Street analysts had been expecting a breakeven quarter and $73 million in revenue, so, growth notwithstanding, the numbers from the second quarter were largely seen as a disappointment. What's worse is that the company admitted that it has had trouble attracting new members and faced headwinds in the U.K. arm of the business. Those struggles no doubt played a part in the company's more conservative third-quarter revenue outlook of $74 million-$77 million. The average analyst estimate for the upcoming quarter was $81.5 million.
Now what: For a young company like Zipcar, investors are looking for growth, growth, and more growth. As such, the admission that growth has been elusive is a troubling thing for them to hear. On the flip side, it's important to remember that Zipcar is a young company in a young industry, so it will be key for investors (if they want to stick around) to watch how the management team addresses the speed bumps the company has hit.
Want to keep up to date on Zipcar? Add it to your watchlist.
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