) -- Shares of

Zagg Inc.

(ZAGG) - Get Report

took off Thursday after the company gave a surprisingly strong outlook for the third quarter, and even with the dramatic plus 40% move up, the stock may still have some room to run.

First, a quick rundown of the current action. After Wednesday's closing bell, the Salt Lake City-based maker of protective covers and ear phones for smartphones, tablets and other mobile electronic devices boosted its revenue outlook for fiscal 2010, saying it now expects year-over-year growth of 70%, up from a prior view of 30%. In fiscal 2009, the

company's sales

totaled $38.4 million.

For the third quarter, Zagg forecast revenue of more than $22 million, a figure that's 12% above the current average estimate of four analysts polled by

Thomson Reuters

for revenue of $19.6 million in the September-ended period.

Shares leapt $2.17, or 42.4%, to close at $7.29 Thursday with volume of 9.6 million running at more than 19 times the issue's trailing three-month daily average of around 476,000. The session-high of $7.45 represents a new 52-week peak for the stock, which at that level had bounced nearly 300% off its May 20 low for the year of $1.90.

The recent rally in the shares ahead of this news had already made short work of both their 50-day and 200-day moving averages of $4.22 and $3.15 respectively, always a bullish sign from a technical standpoint.

With smartphone sales booming, it stands to reason that demand for accessories, like protective covers and ear buds, would come along for the ride as well, and that's precisely what Zagg attributed the revenue strength to. The company also cited its wider retail presence, which includes selling its flagship invisibleSHIELD covers in

AT&T Wireless


MDB Capital Group reiterated its buy rating on the stock following the news, saying the outlook is strong enough to merit a re-evaluation of the company's value proposition. It noted that the new view is more than double previous expectations and said Zagg's revenue forecast for the full year is now in line with what the firm had been modeling for in fiscal 2011.

"The ZAGG share price has appreciated nicely in recent weeks, but the company's current growth trends and growing brand value would appear to warrant even higher prices," the firm said in a research note.

MDB Capital lifted its 12-month price target on the stock to $8.50 as part of its call, saying that price represents a 25X multiple to its new GAAP EPS estimate for fiscal 2010 of 34 cents. "We feel that this valuation is reasonable given the size of the potential markets and the ongoing growth opportunities." The other analysts covering the company seem to agree as the median price target on the stock was already $9.25 ahead of MDB Capital's change.

Zagg is slated to report its third-quarter results on Nov. 10, and it said it plans to provide more color on its outlook for the full year at that time. Wall Street's current consensus estimate is for a profit of 11 cents a share, but that number is sure to move higher given the new revenue view. MDB Capital lifted its projection to earnings of 13 cents a share following the news.

Even with this run-up, the stock looks affordable with its forward price-to-earnings multiple based on a consensus estimate for profit of 38 cents a share in fiscal 2011 at around 22X.

And judging by just how bullish the outlook is and the overall positive trend for smartphones and tablets, Zagg looks like a good bet to continue to flourish. MDB Capital said in its note that gross margins would likely take a bit of a hit from greater presence of retail in the sales mix, but that seems to be a fair trade-off given the amount of topline growth the company now sees.


Written by Michael Baron in New York.

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