Zipcar (NYSE:ZIP), the world’s largest car-sharing service, has become a top lifestyle brand. It is fairly “green” and uses modern technologies such as Apple’s (NASDAQ:AAPL) iPhone. Consider that about 28% of new customers come from referrals. As should be no surprise, Zipcar’s most loyal followers are college students. Hey, the Millennial Generation always likes new-fangled things.
So might this be an opportunity for automakers? Ford (NYSE:F) thinks so. This week, the company formed a partnership with Zipcar to source cars for college locations. The two-year deal will reach more than 250 campuses.
It really does look like a win-win. On the news, Ford shares are up 3% to $11.17. It certainly helps that the company has low-priced models like the Focus and Escape. The deal also is an indication that Ford is trying to find ways to innovate.
However, the biggest winner is Zipcar, whose shares are up 6% to $21.26 in Wednesday’s trading. Not to mention, Ford will allow for a $10 reduction in the annual membership fee for the first 100,000 members, as well as a $1 discount from the hourly rate (for the first million hours). All in all, the deal is a validation of the company’s model.
So in light of all this, does Zipcar look like an attractive investment? Keep in mind that it is a recent IPO and, as a result, the stock has been quite volatile. At the same time, there is growing competition, such as from Hertz Global Holdings (NYSE:HTZ) and Avis Budget Group (NASDAQ:CAR), and even a variety of nonprofit operators.
But with 10 years of experience in the market, Zipcar is in a strong position to benefit from the car-sharing trend. Interestingly enough, the company might also get a boost from the slowing economy as consumers look for cheaper transportation alternatives.
Again, the volatility in the stock price is likely to continue for Zipcar. But over the long haul, the company should continue to provide solid growth. The forecast is for the global market to exceed $10 billion within 10 years. And Zipcar is likely to get a decent chunk of it.
Tom Taulli is the author of various books, including “All About Commodities.” He does not own a position in any of the stocks named here.