Zig-ZAGGing your way to profits
It’s difficult for commoditized tech products to gain traction in a tough spending environment — it’s even tougher when one of your best sales routes, Apple Inc. (NASDAQ:AAPL), has what’s deemed a horrendous quarter. That’s the current plight of Zagg Inc (NASDAQ:ZAGG) , a maker of audio accessories and protective coverings for cellphones that is “suffering” after Apple reported selling “only” 47.8 million iPhones in the fourth quarter. The thought process of why ZAGG is down relates to increased competition in cases from smaller pop-up vendors, as well as a move into audio accessories in a market mostly dominated by Skullcandy Inc (NASDAQ:SKUL) (the sub-$50 price point).
However, I’d also point to the fact that even if margins are being squeezed slightly by an inevitable price war, the smartphone peripherals pie is actually expanding. Just take Apple, for example, which sold 10.8 million more iPhones in the fourth quarter than in the comparable period last year. This is an expanding market with practically insatiable demand from a new user and upgrade perspective. That bodes well for ZAGG, which has an almost symbiotic relationship with Apple when it comes to smartphones and tablets. Ultimately, it isn’t just Apple but nearly all cellphone and tablet makers (sorry, BlackBerry, not you!) that are seeing big increases in demand. This should lead to a higher number of unit sales that will more than cancel out the negative effect on margins. At just seven times forward earnings, ZAGG is worth the gamble.
Foolish roundup
This week we’re ignoring the little trends and focusing on the big trends: Huge tech investments in cloud computing will help VMware; a move toward U.S. energy independence boosts FirstEnergy’s long-term cash flow outlook; and an increasing demand for cases and audio accessories makes ZAGG a compelling buy.
I’m so confident that these three names will bounce off their lows that I’m going to make a CAPScall of outperform on each one.
The article 3 Stocks Near 52-Week Lows Worth Buying originally appeared on Fool.com and is written by Sean Williams.
Fool contributor Sean Williams owns shares of Skullcandy, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of VMware, EMC, and Apple. Motley Fool newsletter services have recommended buying shares of VMware and Apple, as well as creating a bull call spread position in Apple.
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