YES, IOMEGA'S SHARE PRICE IS WAY TOO HIGH!!!
Everyone has been warned about this stock. The SEC had better not waste my tax dollars investigating a bunch of stupid complaints when this stock tanks. You all have to know that this stock is a very, very, very high risk. If you broker didn't tell you that he should be fired.
Iomega's current market cap. ($5.1B) puts it in the same league with Dell computer ($5B) and Micron Tech. ($6.7B). Dell has total revenue of $6 billion and Micron has total revenue of $4 billion. What's Iomega's total revenue, about $0.5 billion. That's 1/10 of the revenue of Dell and Micron. What about net income? Dell's is $200 million, Micron's is $1,000 million, and Iomega's? Iomega's is $20 million, again 1/10 of Dell's and 1/50 of Micron's.
For you who are going to say these companies are not the same, their story is different. That had better be the case. There has to be some reason why someone would be willing to pay 70 times book. Are Iomega's products hot, well you had better hope so because they need to sell about $4.5 billion dollars worth just to justify their current stock price. That's a zip and jaz in every working person computer, about 100 million. I myself have no need for one.
Iomega has been an investor's dream: 13,000% return if you bought just 2 years ago and held through Friday. But, let's say Iomega doubles in the next year, that's just another 100%. The stock price will be $90/share and the market cap. over $10 billion (and let's not forget to add Iomega's secondary offering shares and any options excuted by insiders which will add even more to the market cap. value). With a market cap. of $10 billion, Iomega is now in the league with Sun Micro ($11B), Compaq ($13B), and Texas Inst. ($11B).
At these market cap. levels Sun get away with $7 billion in sells, TI needs $13 billion, and Compaq needs $16 billion. For Iomega's total revenue to be the average of these 3 it needs to increase its total revenue by 2,400% (last year Iomega increased its total revenue by 131%, yes, Iomega needs to have a good year about 2400% increase in total revenue) Out of Sun, Compaq, and TI, Sun has the least net income $500 million. Put that against Iomega's, and again Iomega's is 1/25 of that.
What about companies that are currently at market cap. levels of 1/2 of that of Iomega's? Gateway has a market cap. of $3 billion and Varian's is $1.8 billion (or 1/3 of Iomega's). Gateway's total revenue is $4 billion and Varian's is $1.6 billion. For Iomega to be somewhere in the middle they must increase their total revenue by 5 or 500%. Remember even if they do that they are still demanding a market cap. of 2-3 times that of these companies. As far as earnings, Gateway and Varian each make about 6 times what Iomega makes in net income.
One final thought. Don't forget Iomega's still got to make all those zips (ect.) and at the same time make a profit. Their profit margin is the lowest of all the stocks I mentioned at 4% (no not 25% like Microsoft, no this is not another Microsoft for all you dreamers). At the same time they have high debt levels all ready and the only way they can raise capital is to give more of the stockholder's equity away (issuing more stock will also dilute future earnings more, if there is any). Finally, don't forget competition which you all think will be non existent for some reason or another (MSFT has been following other's products for a long time).
To you novices out there that think stop orders are going to get you out. Forget that, the market makers and institutions are going to get out first and you will be left to pay. Don't complain, you asked for it.
THE ONLY WAY IOMEGA CAN KEEP FROM LOSING MONEY FOR ITS INVESTORS IS IF EVERYTHING AND I MEAN EVERYTHING GOES RIGHT. IS IT WORTH THE RISK? |
