The way Zipcar's (NAS: ZIP) share price has been decelerating, you'd think the business was stalled out for good. However, last week the hipster (or rather, Zipster) hourly car rental company reported a decent quarter that proved the gloomiest critics wrong.

Zipcar's third-quarter net income surged to $4.3 million, or $0.10 per share, compared to just $651,000, or $0.02 per share, last year at this time. The profit included a $1.7 million boost from the sale of Zero Emission Vehicle (ZEV) credits, which other automakers buy to avoid regulatory fines in states like California, which have clean-air mandates.

People who were convinced that competition from similar services launched by old-school car rental companies like Hertz (NYS: HTZ) had completely run Zipcar off the road were disappointed. Zipcar's revenue increased 15% to $45 million, and it grew membership by 18% to more than 767,000.


Zipcar hasn't stayed in neutral, either, having launched its service in Miami, marking its 20th major metropolitan market. It also passed 300 college campuses participating in its Zipcar for University program.

Granted, Zipcar is a risky stock. Although I have a position in Zipcar in the Prosocial Portfolio I'm managing for Fool.com due to its innovative model and possible positive environmental benefits, there's no guarantee the wheels won't fall off Zipcar. I made that clear in my original buy thesis.

My colleague Brian Stoffel recently outlined a few such potential pitfalls. He posits that it's the car-sharing movement itself, not specifically Zipcar, that's the real innovative idea. That theory would mean Zipcar's brand has less competitive advantage than many of us would like to think, and could be absolutely smashed by its rivals.

Car-sharing services certainly aren't limited to Zipcar's product offering. Hertz has already launched its Hertz On Demand service, reaching out to consumers seeking temporary wheels with hassle-free, hourly convenience. U-Haul (NAS: UHAL) even has come up with a similar service, U Car Share, and others are sure to follow.

Meanwhile, I can't help but wonder if the real green disruptor in the transportation space is Tesla Motors (NAS: TSLA) , a stock I keep considering for the Prosocial Portfolio (and then getting cold feet about). Granted, plenty of auto giants are entering the electric vehicle market too, and green options like Toyota's (NYS: TM) popular Prius are still more mainstream (Toyota sells an average of 70,000 of the vehicles a month ).

However, Tesla boasts some important differences, even beyond the recent fact that Motor Trends named the Model S the 2013 Car of the Year. Tesla's shaking up a stodgy industry with its EVs and its Silicon Valley-inspired business model, not to mention a leader who's vocally vowed to help break our oil addiction.

Could Zipcar become a casualty despite its first-mover status in the car-sharing revolution? Of course that's a possibility. However, given last week's good earnings report and Zipcar's brand advantage (see: Zipsters), I see no reason to do anything but put it in Park (and hold the stock).

Is Zipcar's crashing share price a sign to abandon ship, or should you back up the (rental) truck and buy more today? Our top Zipcar analyst will help you answer that question and tell you what everyone is missing about Zipcar today in his premium research report on the company. Click here now for instant access.

The article Is Zipcar Back in the Race? originally appeared on Fool.com.

Alyce Lomax has no positions in the stocks mentioned above. The Motley Fool owns shares of Hertz Global Holdings, Tesla Motors , and Zipcar. Motley Fool newsletter services recommend Tesla Motors and Zipcar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Gumby

Many people would not need Zipcars because they are commuters . What about other people who doesnt commute in owned cars or ride public transporation and things like that. What about retirees, disabled, underemployed and others who just cannot handle the vey high fixed costs of owning even an used autombile . Very high fixed costs which tend to compel those people to drive more than they can afford to. Shared cars will allow them to relax their annual mileage down to 5K miles or so. You have to drive above 15K annual miles to justify owning an autombobile outright. How many of us can afford to pump that much gas to take us that far every year. Riding public transporation is another extreme that is way off the market scope. Ther eis a huge opporunity in between !!! This is where companies like Zipcar can fill in. the challenge for Zipcar is the ability to find parking slots close enough to such people who are probably too slow to realize that they can really benefit from shared cars . So many of us hardly drives more than 5K annual miles !! We stay at home most of the times.. This is the market you are talking about in this article of yours... The other potential maket is what I call extended car access meaning that more families will probably be able to afford only one single car. This will certainly mean infightings over only one car . Losers can walk to the nearest zipcar and drive! Case closed!

November 14 2012 at 12:07 PM Report abuse rate up rate down Reply