Monday, April 19, 2010

ZAGG Inc: The Next Success Story?

With the rise of touch screen technology and the popularity of Apple's products; screen protection companies are set to benefit from consumers willing to spend a little extra cash to protect their entertainment investments. One company in particular ZAGG is a small company with an extremely low market cap of 63.63 million and strong potential for growth. There are a few challenges to overcome but I feel with strong demand ZAGG will have a healthy dose of market share to keep investors happy.

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Report Price: 2.93
52 week range: 2.01-7.91

Zagg has a patented clear film that is applied to iPods, iPads, iPhones and any other device that has a screen. This film is very strong and protects the screen from scratches or wear. The Zagg shield can be applied to both the screen and backs of these devices.

Product Reviews
With the rise of the touch screen this device will be very useful protecting their screens. Especially with a device as expensive as the iPad, consumers may be more inapt to purchase a clear shield to protect their investment.

Reviews are mixed for this product. Some love it and some hate it, but from what I read most complaints had to do with the installation of the product. These complaints came from those who had trouble applying the product and were getting air bubbles. Other complaints were that it made their device feel cheep, more difficult to type on the touch screen and slight color distortion.

Those who applied the product properly had few complaints and many gave the item a five star rating claiming it worked exactly as advertised. I should also note that different device shields had better or worse reviews for example the iPhone 3G shield had better reviews than the iPod touch.

Price and Comparison
For Apple's latest the iPad you can buy full body protection for $29.99 or $21.00 for front only. For the iPhone full protection is $14.00 or a dollar less for front only. Apple is selling similar products from its store that has received just as positive reviews if not better than this product; the company is Power Support Ltd. I am investigating whether or not it is publicly traded or not. From my research they are a Japanese company but I do not know if they are publicly traded.  Apple's product seems to have a pain free installation process with no adhesive required or wait time after application.

Power Support's Product (Sold in Apple Store)

From Zagg's first year of reported earnings the company has posted impressive revenue growth and became profitable in only three years. The key to their profitability is its extremely high margins with a 57.5% gross margin for the full year 2009. Their high margins are due to the inexpensive manufacturing of their product which lead me to believe they have the option of lowering prices in the future to spark more demand or better position themselves for competition.

Zagg has low leverage and sufficient capital to fund operations with a current ratio of 3.48 in 2009.

 Looking at a one year chart I feel ZAGG is better priced today than it has been in a while; I would like to see the price come down a little lower yet due to some of my uncertainties. One challenge ZAGG has to overcome is the competitive market. They may not have the best product currently available but you don't have to have the best to be successful. I would like to see ZAGG develop an adhesive free shield like the Power Support static shield. Even though they might not have the best product I still feel the company will benefit from strong demand in the future. They also seem to be better positioned for iPad shield demand as Power Support still has their status as coming soon.

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1 comment:

  1. The fact that it is recommended that someone else apply the invisible shield for you has always been a concern of mine. So unless ZAGG does something about it soon, it will be a problem. On the flip side because of their small size I foresee growth at nice rates for at least 1-2 years. If you bought in around $2.60 it doesn't matter but for me who got in a bit later I have some pricing concerns. People have there hand on the trigger for Q1 '10 be careful!