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I am responding to everyone here. In a bear market condition, investors will pay LESS in terms of price/earnings ratios than in a bull market situtation. Make no mistake about it, tech stocks are in a bear market, and will probably drop a bit more (10-15%). For example, say company X is earning 1.50 sh/yr and growing at 25%. In a bull market, the shares might be valued at 30x earnings or 45, but in a BEAR market, the earnings might be valued at 15x or $22.5, a BIG difference in price. This contraction in what investors are willing to pay has nothing to do with earning potention, current earnings, etc... but on the psychology of the investor. In a bull market, people are more optimistic and will pay more for growth, in a bear market, they are pessimistic and they will pay less. You have to remember that a company's stock price and company's stock performace are not exactly coupled together. It is all about human nature and psychology. Stocks aren't strictly about numbers, they are mostly about psychology. A stock trading at a P/E of 300 can be trading at a P/E of 150 or 600 and it could still be fairly valued. Get the picture. I see a drop to 20 by Thur for Iomega, but a rebound to the low 30s after earnings. |
