Between 2000 and 2005, Zipcar entered its first four cities: Boston, New York, Washington D.C. and San Francisco. In 2011, its business in these established markets grew by 23% as the car-sharing company deepened its penetration, adding new members. Pre-tax income from these markets increased to 23% of revenue in 2011 from 21% in 2010.

The markets also saw an improvement in utilization levels, with usage revenue per vehicle per day increasing from $64 in 2010 to $69 in 2011. Revenue and pre-tax income trends in the established markets suggest that the newer markets could see similar trends once they achieve maturity and improve penetration levels.

Frost and Sullivan estimates the North American car-sharing market will reach $3.3 billion with 4.4 million members by 2016, presenting a huge market opportunity for car-sharing companies. Zipcar estimates that more than 10 million drivers live within a 10-minute distance of a Zipcar location. This indicates much greater scope of penetration as the popularity of car-sharing rises. Zipcar currently serves more than half-a-million members in North America and could pass 2 million members by the end of this decade, by our analysis.

We have a price estimate of $22 for Zipcar, which is at a premium over the current market price.