America On-Line: will it survive ...? Message Board

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Technology Stocks : America On-Line: will it survive ...?

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To: Val who wrote (2578)	3/26/1997 11:22:00 PM
From: Johnathan R. Bowden	of 13594

When this stock comes down to earth, who knows. From the Motly Fool Board: Based on a rough subscriber-based valuation, a "fair" price for AOL's stock lands the stubs around $53.50 per share. That number is arrived at by multiplying members (8 million) by expected life-subscription payments, to get: 8 million x $16 = $128,000,000 x 40 months ------------------------- = $5.12 billion market cap The $5.12 billion market cap is about $1 billion above AOL's current capitalization, implying the fair stock price of $53.50. This number is conservative because advertising and transaction revenues are not included, and the implied 40 month life-span of a subscriber is questionable. Churn is down and membership-spans are increasing. Also, have you noticed better access yet? Many are saying it's slowly improving. My question, I'm not famiiar with the cable industry model, but has anyone seen this approach in valuating a company? Or is this a last ditch ploy to justify an overinflated stock price? Every company would love to be valuated based soley on revenue streams, but what about expenses? regards, John

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