LANCASTER,Pa --(Business Wire)--June 19, 1996 -- Emerald Research reiterated its strong buy recommendation on Iomega Corp. in a report issued Wednesday.
In the report analysts Joseph Besecker and Joseph Garner stated that Iomega's business fundamentals continue to rapidly improve and that the recent weakness in the company's shares have presented an attractive buying opportunity for risk-tolerant, growth oriented investors. Emerald's 12 month price tartet is $40 - $45 per share.
Emerald stated the following in the report:
---Much of the speculative activity in Iomega shares has focused on perceived potential competition from the LS-120 drive.
--The LS-120 is not new competition. The product was announced in May 1995 by a consortium consisting of disk drive maker Matsushita Kotobuki Electronics (MKE), media maker 3M, and computer maker Compaq Computer. Compaq began shipments of selected high end business computers containing the drive in April 1996.
--Emerald stated that the LS-120 compares poorly with Iomega's Zip in terms of price and performance. The LS-120 operates at less than 50 percent of Zip's speed and Compaq's price for a built in LS-120 is more than double Zip at $209 versus $99 for an internal Zip drive installed on computers made by Micron Electronics and others.
--Emerald stated that discussions with Compaq and its distribution channels indicate that the company has sold only tens of thousands of computers containing the LS-120 at best, versus the over 2 million Zip drives sold by Iomega since production began in late March 1995.
--Iomega has made significant strides in extablishing Zip as the successor the floppy drive as the industry standard with its agreements to provide Zip drives on selected computer models from IBM, NEC Technologies, Micron Electronics, Hewlett Packard, ESCOM, Dell Computer, Acer, Packard Bell, Power Computing, Unisys and Bandai.
--The limited success that LS-120 has had in OEM markets in the past 13 months and its non-presence in the after-market makes Matsushita's announcement to bring on Mitsubishi Electronic Corp. as a second source for drive production difficult to rationalize.
On the other hand, Iomega has announded that it has capacity to produce five million Zip Drives through its internal capacity and externally through partners such as Seiko Epson. In addition, the company stated yesterday that it is making progress in expanding its capacity to meet after-market and OEM demand.
--Emerald raised its second quarter EPS estimate to 11 cents per share and 1996 full year estimate to 57 cents per share based on strong growth of the Zip product line.
--Emerald initiated 1997 EPS estimate of $1.20 per share on $2.3 billion in revenues.
--Emerald stated that Iomega shares are attractive at 24x 1997 EPS estimate.
Emerald Research initiated coverage if Iomega with a buy recommendation on May 8, 1995.
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