The Cheap Retailer That Will Be Outfitting Your New iPhone 5

| About: ZAGG Inc (ZAGG)
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A lot of articles have been written about the various component makers that could piggyback off the successful rollout of Apple's (NASDAQ:AAPL) iPhone 5, including this one. One retailer that could also benefit immensely is ZAGG Inc. (NASDAQ:ZAGG), which is the leading maker of tablet and smartphone accessories. Apple changed the size of the latest version of the iPhone for the first time since its launch in 2007. This means all those old cases will no longer fit this new version, which sounds like a great new source of demand for ZAGG. The stock has been under a cloud due to some pledged stock awards that caused the resignation of its CEO who had to sell most of his stock to meet margin calls. However, given the stock's valuation and growth prospects the company seems undervalued by the market.

"ZAGG Inc. designs, manufactures, and distributes protective coverings, audio accessories, and power solutions for consumer electronics and hand-held devices primarily in the United States and Europe." (Business description from Yahoo Finance)

6 reasons to buy ZAGG at just under $9 a share:

  1. The company has grown revenues from just over $5mm in FY2007 to a projected $250mm in this fiscal year. ZAGG is predicting 38% CAGR in sales from FY2010 through FY2014.
  2. From FY2008 through FY2011 earnings per share rose almost 600%.
  3. The smart phone and tablet accessory market is projected to grow some 10% a year from FY2011 through FY2015 to $61B by the end of year 2015.
  4. The company is the biggest player in this space with just over an 18% market share. The market is very fragmented and ZAGG is consistently growing market share. 9 companies have between a 2% and 8% share and the rest is divided by even smaller players.
  5. ZAGG is selling at just over 8 times forward earnings and has a minuscule five year projected PEG (.42).
  6. The five analysts that cover the stock have a median price target of $18 a share, more than double its current price. Price targets range from $10 to $22 a share.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ZAGG over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.