Ford Hitches a Ride With Zipcar

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 companys 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.