Barron's: Zipcar stock steady around $26; prudent investors should steer clear

Zipcar's initial public offering (IPO) earlier this month turned a concept – vehicles available for rent by the hour – into a $1.2 billion stock-market value, according to Barron's, America's so-called "premier" financial magazine. However, the car-sharing company, as we've pointed out before, is in the red. Despite that, Zipcar shares are currently trading for around $26, up substantially from the IPO price of $18. However, Barron's suggests that the future outlook for Zipcar is sketchy, posting that:

Growing competition in hourly-rental from conventional rental-car companies like Hertz and Enterprise could make it tough for Zipcar to generate sufficient earnings to justify its lofty market capitalization. The stock, which went public at 18 and now trades near 29, looks richly priced.

Barron's points out that some will inevitably argue that Zipcar, as a leader in the car-sharing industry, should have pricing power and a "first-mover" advantage, but the financial magazine still warns that Zipcar's future looks questionable. In fact, Barron's cites Zipcar's 2010 combined pre-tax profits of a mere $23 million in its four established markets – New York, Washington, Boston and San Francisco – and losses reported in most of Zipcar's other markets, as the main reason that "prudent investors will steer clear" of Zipcar stock.

And here's an obvious disclaimer (again): AutoblogGreen is an automotive site, not a financial one. The views and opinions expressed above are those of Barron's Andrew Bary.

[Source: Barron's]