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).
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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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