EARNINGS UPDATE: AOL
BULLS READY TO PARTY
By Peter D. Henig
Red Herring Online
August 3, 1998
Is America Online (AOL) in a class by itself? Its
investors think so, as the online service prepares to
unleash what many expect will be a darn good (if not
downright great) quarter.
AOL is due to report earnings on Tuesday, with the
Street looking for profits of $0.19, according to First
Call, versus year-ago earnings of $0.05. Whisper
numbers are closer to $0.21, with some rose-colored
bulls on Yahoo chat boards predicting $0.24.
Tonga line
"I'm expecting $0.22," said a supremely confident Keith
Benjamin, Internet analyst with BancAmerica Robertson
Stephens. "The tone will be upbeat and my inclination to
raise earnings estimates will be noticeable."
Does Mr. Benjamin have an insider's crystal ball, or
does he know more than the average bear?
"AOL is way past the traffic stage," said the analyst,
completely rejecting the notion that recent declines in
traffic numbers for the likes of Infoseek (SEEK) and
CNet (CNWK) could have an impact on AOL's results.
"Comparing AOL to Infoseek? That's laughable," said
Mr. Benjamin. "Maybe new account growth might be an
additional factor, but AOL is getting too big for that."
Mr. Benjamin's unflappable attitude could be linked to
the launch of Internetstocks.com, Robbie Stephens'
newest initiative into providing investment banking level
research and analysis on the Web.
Although rumors had it that Mr. Benjamin would be
wearing a grass skirt at the launch party in the Fairmont
Hotel's ritzy Tonga Room, the analyst flatly rejected
such charges. "That is categorically untrue," he
countered. "I will be paddling out in a boat, and that's
it."
Network effects
Cisco Systems (CSCO) also steps up to the earnings
plate on Tuesday, and investors are equally bullish on
the networker.
Shares in Cisco have been bid up sharply over the past
couple of months as shareholders expect strong earnings
growth out of this stockmarket superstar. Cisco settle
up another $0.75 on Monday to $96.50, despite
continued market weakness, now entering its third
straight week of downside moves.
According to First Call, the Street is looking for $0.47
in per-share earnings, versus year-ago profits of $0.37.
However, such optimism comes at a cost, as analysts
predict that anything shy of $0.49 will likely be
considered disappointing.
With the broader markets nervous, listless, and
leaderless, any significant miss by either Cisco or AOL,
both bellwethers in their sectors, could signal more
market drops.
But for now, it's still a party in the Tonga Room.
Tuesday, August 4
America Online
This quarter (projected): $0.19
Last quarter (reported): $0.16
Same quarter year-ago: $0.05
Analyst recommendations
Strong Buy: 17
Buy: 6
Hold: 1 |
