I attended the LD Micro conference in LA this Thursday and spent a lot of time with ZAGG, listened to comments from institutions attending 1 on 1's with Robert, spent time around their booth where they were installing ZAGGskins on people's phones, charging my iphone with the ZAGGsparq all day, and talking to all of the major holders there.
This was the #1 show at the conference. They had a SRO crowd 81 to be exact. Robert did the BEST job ever. He quieted all of his critics with his presentation as evidenced by 0 questions after the presentation or outside where he waited for people to stop. He wowed them.
Four reasons for recent stock weakness.
1. Stock went from $1 to $3.50 earlier in year then Merriman picked it up in coverage, and they took it to $7.50, pulled their recommendation at $5 and everyone of their customers have a loss, and have made money elsewhere, therefore ZAGG is a tax loss situation. Maybe they come back, maybe not, but internally as of Thursday the analyst was pounding the table for it to be bought although he was not changing his numbers, which we will not see until March, and that is a lifetime from here. On Thursday it was reported Marc Robins a long, long time analyst dropped coverage. He changed firms and had to drop coverage under old firm which went out of business to new firm who will recommend it as soon as he is onboard. This was the perfect storm, weak stock action, rumors about Robins pulling reco, and I know he loves the name he said so on the dais on Wednesday night.
2. Worry about drop in gross margins, and the reason for that is the internet sales with high margins are being dwarfed by the wholesale ramp which is why you are in business to drive revenues, lower SG&A, and increase EPS, that is why we invest. So lets drop the gross margin discussion. Robert explained it to the letter.
3. They were going to do a raise to pay for hZo, and Robert said no raise, no raise. End of that discussion.
4. Small cap stocks have sucked for last 30 days.
Reason for optimism.
Record sales, record earnings for 2009, earnings going up $100% in 2010. They will earn $.40+ and with a $25-30X P/E in 2010 the stock should be in the teens this time next year. 300% + kind of gain.
New products adding big to internet sales, new countries Japan, Russia, China, Australia, sort of large companies being added to the mix, audio products going to big box retailers, hZo coming on stream mid year, wireless companies which in total could add $15m++in sales over a period of time, huge market.
Appspace.com go log on and look. This is like GOOGLE, and FACEBOOK were at their inception it will drive traffic to ZAGG, lead to potential advertising deals, accessory sales, and commissions from app sales.
ZAGGbox can add $7-10m in sales if successful.
ZAGGsparq is a blowout in my opinion.
ZAGGskins is a homerun.
Invisible Shield is largest accessory Best Buy sells #1. Also gaining traction in Radio Shack, Cricket, and T Mobile in 800 stores in Germany, USA will not be far behind.
At the end of the day it is all about Earning per share, growth, and visibility of earning per share to attain a growth stock P/E ratio which should be 50% of the company's growth rate. If we grow 2010 by 100% or more then what should the multiple be? Today it is 9.5x 2010 guesstimates.
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