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NEW YORK - The stock of Iomega, hard-hit earlier this week, jumped nearly 20 percent today after an
influential Wall Street analyst initiated coverage of the company by recommending the stock to investors.
J.P. Morgan analyst Daniel Kunstler said he initiated coverage of Iomega with a buy rating and set a
12-month target price of $42 per share, double its closing price yesterday.
Iomega's stock gained $4 to $25 in early trading of more than 8 million shares on Nasdaq today after
falling $4.50 yesterday to close at $21 on heavy volume of more than 20 million shares.
Iomega, which traded at around $1 a year ago, has fallen sharply in the last month from a high of $54 in
late May.
The company's removable disk drive serves as a high-capacity replacement for traditional floppy-disk
computer data storage. Its Zip disk has a capacity nearly 100 times greater than that of a conventional
floppy disk.
The analyst set a 1996 earnings estimate equal to 52 cents per share and a 1997 estimate of 88 cents a share.
Iomega's profits equaled 7 cents a share for all of 1995.
"Iomega has caught an entire segment of the computer industry asleep at the switch," Kunstler said in a
report to investors.
He noted that while microprocessor speeds have multiplied, Internet growth has spiraled and demand for
multimedia storage has grown, demand for removable data storage products remains largely the same as a
decade ago.
"Iomega has the razor blades to go with its razors," said Kunstler, referring to Iomega's replacement disks
for its high-capacity memory devices.
In recent months, several large computer makers have announced plans to offer the Zip drive as a
factory-installed option on certain models in their personal computer lines.
Some industry analysts believe Iomega's drives could become a widely accepted standard and one day
replace existing floppy disk drive technology.
Market research firm International Data Corp. has estimated that the unit sales of Zip drives or similar
products from rival companies will grow at an annual rate of 100 percent through the year 2000, reaching
90 million installed units.
Iomega previously had been followed mostly by smaller brokerages specializing in high-technology stocks.
Its stock has suffered from extreme bouts of volatility due to the lack of support from large institutional
investors, who can act as a stabilizing factor against such price swings.
The stock has earned itself an enormous following among individual retail investors, especially those who
participate in America Online's Motley Fool online investor forum.
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