Zipcar is a Theme Investment

Congrats to Zipcar for a very successful IPO, shares are trading more than 70% above the offering price today.  I hear very little applause out there though, most people don’t quite understand why a 10 year old company that isn’t profitable is acting like this.  Let me take a whack at an explaination.

Without getting too deep into it here, because I have a forthcoming post that does, Zipcar is representative of a MONSTER trend that is taking place within our economy right now.  You can think of an investment in Zipcar as an investment in this trend, not necessarily an investment in this specific company.  Yes, if you read this blog and understand my approach to the market, you know that investors often do not look at single company in a vacuum, they often invest based on broader themes they see developing.  You can think of Netflix this way.

Zipcar is the perfect representation of the fact that our economy is shifting, drastically, from people wanting to own things, to people wanting to use things, but have no desire to own them.  This shift is made possible by recent technological advances in peer to peer networks.  These services are sprouting up in every industry, even baby toys.  Instead of buying baby toys which you will throw out in a year when your kid outgrows them, why not rent them when it makes sense, with a subscription service, and send it back when your kid is done playing with it, like a video game rental.

Zipcar is playing on the same theme, why own a car when you only drive it once in a while?  The model is definitely not perfect, and their business won’t really take off until they have a critical mass, kind of like what happened to Amazon, do you all remember how unprofitable they were for so long?  But when they hit that critical mass, wow, an amazing business was unleashed, it was only a matter of time.  We’re looking at the same scenario here, Zipcar just needs scale.

Would I be trading Zipcar here?  No, not because I don’t believe the stock is going up, but because trading recent IPOs is definitely not my specialty.  I need to see at least a month of action before I get involved in a new IPO.  So I won’t sit here and tell you to buy it for a trade, let alone buy it for an investment.  What I will say is this.  Zipcar is operating at the very beginning of a major economic revolution, that’s dangerous, many will fail before many more will succeed.  But if you can manage risk well, and keep your eye on this huge trend, there will be monster opportunities to make a lot of money in this name over the next 5-10 years.

 

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