August 3, 2012, 3:07 P.M. ET
Zippity Doo-D’oh! Zipcar Plunges
By Avi Salzman
Zipcar (ZIP) is put-putting right into a ditch today, as investors punish the car rental service for a weak earnings report. The stock is down 34% in afternoon trading, and several analysts are warning investors not to buy shares even if they might look “cheap.”
The short-term car rental service posted disappointing earnings results late on Thursday — it lost a penny a share against expectations that it would break even. The company also cut its revenue forecast for the year. The company has had mixed success in attracting new members, and could see more competition ahead.
“ZIP still sees limited impact from competitors. However, we continue to believe competitive risks are increasing,” wrote MKM Partners analyst Christopher Agnew.
Cowen & Company analyst Kevin Kopelman cut his rating to Neutral from Buy as the company’s attempts to jumpstart earnings may end up hurting near-term results.
“On the call, management announced several initiatives to re-accelerate growth, including: (1) new memberships with less upfront fees to encourage trials and retention (rolling out in 2H), (2) the evaluation of potential new services like peer-to-peer car sharing and intra-city one way trips, (3) revamped marketing strategies, including a new referral program and a greater focus on partnerships, and (4) a technology upgrade, including an enhanced reservation system and mobile app. While we are encouraged by the aggressive steps, we have limited visibility into timing and expect the new programs to weigh on near-term profits.”
