Wunderlich Says Zagg Is A 'Classic Turnaround Story,' Initiates At Buy

In a report published Tuesday, Wunderlich analyst Rommel Dionisio initiated coverage of

with a Buy rating and $13 price target, noting the company is a "classic deep-value turnaround story." "Following disappointing sales and earnings performance in 2013 and first half 2014, shares of Zagg remain valued at an approximate 25% discount to the peer group average on an EV/EBITDA basis," Dionisio wrote. "However, as management continues to execute successfully on the turnaround story, we believe this will result in multiple expansion on the stock, as well as potential upside to consensus earnings forecasts." According to Dionisio, Zagg's management team has successfully begun to rebuild revenue growth and expand operating margins through a series of initiatives, including new product innovation, rationalization of the product lineup, expansion into retail channels, and broadening the international distribution. Dionisio continued that Zagg's products occupy a leading market position including being number one in screen protection (46 percent of sales) with roughly 40 percent of market share. The company is also the number one leader in tablet keyboards (31 percent of sales) with roughly 25 percent market share. Bottom line, as Zagg's management team continues to execute on its turnaround plan, investors will award the stock with higher multiples over the next few quarters.