ZAGG Can Still Cash In on Apple's New Toys

By Markets Fool.com

Image source: ZAGG.

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There aren't many companies that hang on every "one more thing" moment atApple (NASDAQ: AAPL)product launches other than ZAGG (NASDAQ: ZAGG). It carves a living out of providing third-party accessories for smartphones, tablets, and other consumer electronics. It lives to serve the voids that the first-party hardware makers leave behind.

The product that put ZAGG on the map -- the InvisibleShield protective film that routinely tops the market in screen protection -- came about because smartphone and tablet screens cracked too often. From Bluetooth keyboards to charging solutions, if Apple and its peers don't get it right out of the gate, there's a good chance that ZAGG will be there to offer a viable solution.

By ZAGG investor standards, yesterday's iPhone 7 event would seem to be anticlimactic. The iPhone 7 and the Apple Watch Series 2 have the same form factors as last year's models; that iPhone 6 Plus case will work perfectly fine on the iPhone 7 Plus, and if you can peel the InvisibleShield off of last year's Apple Watch, it may just work on the new one.

This would seem to make yesterday's presentation a non-event. Given the volatile nature of ZAGG's stock-- it has gone from as high as $12.74 nine months ago to $4.71 just four months ago -- the presentation was the kind of ho-hum moment that might crush the stock. It has soared 68% since bottoming out in May, and no news is not good news.

Thankfully ZAGG isn't asleep at the wheel. It introduced several new products today, and it may also have a notable competitive advantage in the one door of opportunity that swung open at Apple yesterday.

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When Apple zigs, ZAGG zags

ZAGG introduced a new line of protective products and audio accessories. It is repositioning its InvisibleShield screen protectors for the iPhone 7, iPhone 7 Plus, and Apple Watch Series 2. Starting at $39.99 -- with a high-end sapphire-infused $49.99 model -- they'll sell well, but there will be challenges. Beyond the new iPhones having the same form factor as the last two iPhone models, consumers might wrongfully assume that Apple's new gadgets are sturdier just because they are now water-resistant and dust-resistant.

The more exciting prospects for ZAGG this product cycle may lie with its iFrogz wireless headphones. In a controversial yet spunky move, Apple has done away withthe headphone jack in thenew iPhone 7 line; it is why the new devices can be sealed tighter to keep water and dust out.

While there is an adapter that uses the Lightning charging slot for audio, a more popular route will likely be to go wireless via Bluetooth connectivity. Apple offers its high-end AirPods solution, but at $159 for a set of wire-free earbuds with five hours of battery life between charges, it's a safe bet that many new buyers will seek out cheaper and longer-lasting solutions.

That's where ZAGG fits in. In a market dominated by pricey Bluetooth headphones -- roughly two-thirds cost more than $50, and the cost is a lot higher once you delve into Apple's own Beats headphones -- ZAGG's iFrogz line offers several options for less than $40, with roughly double the battery life of AirPods.

ZAGG can use some hits to get momentum going again. Its revenue fell in 2013 for the first time as a public company, and it wasn't until last year that its top line caught up with its 2012 performance. Getting margins back on track is a different story. But that's one more reason ZAGG had better hope it can fill the voids that Apple leaves behind.

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Rick Munarriz owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple.

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