STOCKS ANALYSIS
Jun 20 2000 4:41PM ET
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AOL Stock May Be Ready to Break Out
From IDEAglobal
Special to CNBC.com
Shares of Internet service provider America Online Inc. {AOL} are trading right at
their 50-day moving average of 56 3/8 and just shy of their 200-day moving average
of 62 21/32. The stock looks poised for a breakout and will likely rally in the next
four to eight weeks -- moving as high as 70 -- even though it is currently about 40
percent below its 52-week high of 95 13/16 hit in December.
AOL Tuesday announced plans to offer a flat Internet connection and user rate to
compete more effectively with European rivals. AOL Europe will soon offer users in
both Germany and the United Kingdom a flat rate, which they would pay once a
month and then not have to pay for the telephone-call duration of their Internet
surfing.
The Internet provider has recently unveiled a number of initiatives to stimulate its
business and stock price.
Last week, AOL detailed a service that will allow users to access the ISP on Sprint
PCS Group's {PCS} wireless Internet-ready phones. An AOL icon now appears on
the opening screen of the Sprint PCS Wireless Web. It will allow access to AOL
features, such as e-mail, news, weather and stock quotes, as well as content from
some of AOL's other brands, including local city guide Digital City and MovieFone.
AOL, which is expected to close its merger with media giant Time Warner Inc.
{TWX} this fall, first announced plans to offer AOL features through Sprint PCS
phones in February, as part of its AOL Anywhere strategy. The company also has
plans to develop a version of AOL message software for use in Nokia Corp. {NOK}
phones and a deal with Motorola Inc. {MOT} to develop a co-branded personal
interactive communicator as part of AOL's mobile messenger service.
Shares of AOL are down 23 percent over the past three months and 33 percent over
the past six months. Of the 40 Wall Street analysts who follow the stock, 25 still
rate AOL "strong buy" and 12 rate it "moderate buy." In fact, Donaldson Lufkin &
Jenrette analyst Jamie Kiggen recently reiterated AOL as a "top pick." His
12-month target price is 120.
AOL is expected to report fiscal fourth-quarter results for the three months ended
June 30 of 11 cents a share on July 21. Should the results come in as expected,
earnings would be flat sequentially and up from the 6 cents reported a year earlier.
However, AOL has been known to surprise Wall Street, and the possibility of
stronger results is certainly likely. In fact, AOL's fiscal third-quarter results came in
22.2 percent stronger than expected.
AOL is expected to earn 38 cents a share for fiscal 200. Analysts forecast the
company's earnings will increase 42 percent to 58 cents a share. And, on average,
the company is expected to increase earnings close to 50 percent a year over each
of the next five years. This growth rate is in line with the Internet-services industry
as a whole. |
