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Zipcar Sputters on Weak U.K. Growth

Despite besting bottom-line expectations, ZIP drops in today's session

by 2/14/2012 3:00:54 PM
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Option activity is heavy on Zipcar, Inc. (ZIP - 13.90) in today's session, on the heels of the car-sharing concern's fourth-quarter earnings results. Speculators are placing bets on both sides of the aisle, with calls and puts trading at increased levels. More than 1,200 calls and roughly 1,100 puts have crossed the tape, representing seven times and 10 times their respective average daily volumes.

For the quarter, ZIP said its profit arrived at $3.9 million, or 9 cents per share, compared to its year-ago loss of $1.06 million, or 17 cents per share. While revenue jumped 21% to $63 million, sales were weakened by lower-than-expected growth in the U.K. The bottom-line results beat analysts' projections for ZIP to break even; however, sales fell just shy of the $63.1 million that brokers were calling for.

Looking forward, ZIP is expecting current-quarter revenue to range between $58 million and $60 million, and full-year sales of $290 million to $296 million. As a point of comparison, Wall Street is forecasting first-quarter and fiscal 2012 sales of $60 million and $293 million, respectively.

Due to the sales miss, shares of the stock are down 13.9% in today's session -- erasing more than half of the 20.3% they've tacked on in 2012. As it turns out, ZIP's year-to-date gain paints a deceptive picture of the stock's technical strength. From a longer-term perspective, ZIP has lagged the broader S&P 500 Index (SPX) by more than 22 percentage points during the past 60 trading sessions. In this same time frame, the security has been pressured lower by its descending 20-week moving average.

Price Chart of ZIP

Despite today's slight preference for calls, ZIP may be exposed to some contrarian-related headwinds in the near term, should its price action continue to break down. Ahead of today's post-earnings plunge, sentiment from the brokerage bunch remained rather bullish. Zacks reports that five out of six analysts maintain a "buy" or better recommendation toward the stock. In addition, Thomson Reuters calculates the consensus 12-month price target at $25.90 -- representing a brazen 92% premium to today's intraday low of $13.50.

Any downgrades and/or price-target cuts from this bullish brokerage bunch could encourage a new batch of bears to the table -- smacking ZIP even lower in the process.

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