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Technology Stocks : America On-Line: will it survive ...?
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To: Brian Collins who wrote (1204)1/24/1997 1:56:00 PM
From: John Howell   of 13594
 
Brian,

Tough call to make on those puts. At 1:35 EST the stock has tested the days high and bounced off a little bit. I can't help thinking that by next Fridays close AOL will be in the low 30's to high 20's. The AOL chart offers no real basis for TA since it hasn't been around long enough to establish strong patterns; however, one could make a case for the formation of a recent rising trend channel, a bullish formation. Also the 50 and 200 day moving averages are bullish.

To me, all of that pales in comparison to the fundamental nature of AOL's business, and what I perceive to be the lack of technical competence by the funds. AOL's business model (the latest one) just doesn't hold air. Nobody is going to wait in line for content on the web the same as they would a roller coaster at Six Flags.

Consider this.

1. They aren't making money selling access (in fact, every customer that signs up represents increased debt).

2. They aren't making money selling advertising (recent WSJ summed up the failures of the old Internet advertising model).

If I were you I would hang onto your position. If the stock trades back up and the puts are in the same price range that you bought them, sell them and sit on the sidelines. If the bubble bursts on AOL I think that Case will lose credibility with the investment community and won't be able to spin new BS to keep the price up. Under that scenario the three weeks you have left on your option would translate into a grand slam. To me its worth the risk.

That's my two cents worth; I hope you knock'em dead.

John
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