Zagg On Solid 3-Year Growth Trajectory, DA Davidson Says In Bullish Initiation

Zagg Inc ZAGG, a leader in the battery case and screen protector market, is poised to see solid sales growth and margin expansion over the next three-year period, an analyst at DA Davidson said.

The Analyst

DA Davidson's Tom Forte initiated coverage of Zagg with a Buy rating and $20 price target, suggesting roughly 60 percent upside from current levels.

The Thesis

Zagg is expected to grow its revenues at a 6.6 percent CAGR between 2017 and 2020, with adjusted EBITDA margin remaining almost flat at 14.1 percent 2020 compared to 14 percent in 2017, Forte said in a note.

Citing its thesis that the future of retail is SIMPL –- Social, International, Payments and Logistics -- Forte said Zagg will likely see upside to his sales and margin forecasts from social, international and mobile.

Among the emerging trends in retail, the analyst is bullish on Zagg for its consumer IOT, co-opetition with Amazon.com, Inc. AMZN and store efforts.

On valuation, DA Davidson said Zagg's shares trade at a discounted valuation to its peers.

The firm sees the following as potential catalysts for shares:

• A rebound in power cases following a 16.2 percent drop in Q4 2017;
• Continued strength in power management devices; and
• International expansion.

The Price Action

Zagg shares are up about 80 percent over the past year. The stock was trading up 4.7 percent at $13.20 on Friday.

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