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ZAGG Inc Message Board

  • smilingwolfcapitalmgmt smilingwolfcapitalmgmt Dec 6, 2012 11:29 PM Flag

    My General Forecast for Qtr Earnings

    I think ZAGG will crush on Revenue estimates, beat on EPS (but not crush it).

    Overall, I noticed ZAGG switched to a more profitable base product with the new InvisShields as they are charging 50% more for them. While there might be higher manufacturing costs, it seems to me it is cranking up the overall channel margins.

    At the same time ZAGG was really aggressive with Black Friday, both directly and indirectly via Walmart, et al.

    I suspect they are using the higher margins generated during iPhone 5 sales to cover for the sales for BFriday so as to deliver a slight improvement to profit margins with a huge step up in Revenue.

    The goal being to liquidate everything they can get their hands on so they can knock down debt and replace it with debt that allows buybacks. In turn, this sets up for the following quarter where they can justify a reduction in revenue (since not Xmas) and show improved profit margins - classic earnings management being setup being established hehe.

    All in all, I would be supportive if this were the case, on the capital market side this stock needs the support of a stock buyback program.

    Sentiment: Strong Buy

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    • WOW, look at volume and compare it to points in the past. The second volume picks up, wow, a few big institutions can send this screaming.

      Sentiment: Strong Buy

    • the product supply side of the formula hasn't been presented in this thread.......there is a running tally on what's being sold off the shelves right now through xmass.when forecasted inventory over sells through the holidays you will get a real "window" of where those earnings are going and pps will be on the rise before it's time......that is my prognostication.JMHO

      Sentiment: Hold

    • I thought companies were not supposed to manage earnings. I'm disillusioned.

    • How do you think the ytd declining stock price will affect their ability to refinance with more favorable covenants? Also, outside of unmeetable margin calls due to an increasing pps, is there any other reason short interest could be forced to cover? I ask that because I am stunned that shorts have not covered in the midst of 35+% ytd drop in pps.

      Sentiment: Buy

      • 3 Replies to cant_makethisup
      • Very little tbh, Debt investors/banks are more about the numbers and less about the stock price. If they do the stock buy back it will force the shorts to cover - as the company retires shares from the open market and moves them back into Treasury stock, they are no longer available for shorts to utilize. Right now there are next to number shares available for shorting so it would force them to close out their position. Further, since the value of a company like ZAGG is influenced more by forward looking earnings and growth than it is book value, the forecasted EPS and Rev/S would go up due to fewer shares. So right now the stock has a historical EPS of 0.77; but if there were 10% fewer shares, that number would go up and it would cause the share price to rise. As disinc mentions below, the shorts have not covered because they can't - everytime they lighten up the share price screams to $7.50. You can tell by looking at the history of shares available to short - every time shares become available the price goes up like a rocket ship.

        The best strategy for the shorts at this point is to manipulate the price and keep it down and use options strategies to lighten up to allow for a more conventional exit. If that happens you will see Put premiums get crushed, especially on ITM and ATM options.

        Sentiment: Strong Buy

      • If Smiling Wolf is correct the shorts are in a bad place. If I were short I'd be working down my position this month to keep more of my money out of Barry Boy's hands. Of course, if the price rises next year and they lose money, Barry gets nothing at all.

      • The shorts have not covered because they cannot cover without driving the price up above where they shorted it. The volume is too low.

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