I'm not sure where they got the numbers either. Seems like a flip-flop of the estimates.
RAISING ESTIMATES BASED ON INCREASED VISIBILITY; BUY
Robertson Stephens
Keith Benjamin
September 24, 1997
KEY POINTS:
* We have raised our F1999 EPS estimate to $1.65 from $1.45.
* We believe we now have better visibility on the CompuServe deal.
* We also have increased confidence in the company's upside potential from established commerce deals.
* We believe there is still considerable upside to our revised estimates.
SUMMARY:
We are raising our F1999 estimates for America Online based on increased visibility on both the CompuServe (CSRV-$14 1/8) deal and the company's commerce deals.
To account for CompuServe, we have conservatively estimated $90 million per quarter in revenues, beginning in the June quarter of next year (4Q:F98). Although nothing is set in stone at this point, AOL plans to continue running the CompuServe service as a separate unit, hoping to further strengthen its position in the European and SOHO markets. We expect the CompuServe deal to close within the next six months.
We also have increased confidence in the potential for upside from the company's existing commerce deals. In its most recently announced agreement with N2K, a leading on-line music retailer, AOL will receive an up-front payment of $12 million, with a guarantee of $18 million over the next three years. AOL will share in advertising and sales revenues per an undisclosed contract. We believe there is considerable upside potential to the $18 million, considering the growth of the Internet music retailing business. According to a recent Jupiter Communications report, the music e-tailing market generated approximately $18.2 million in 1996 and is expected to increase to $47 million in F1997. We view N2K as just one of the many commerce deals AOL has entered which could result in significant e-tailing dollars to AOL.
IMPACT ON BUSINESS:
We have raised our F1999 e-tailing contract revenue estimate to $130 million from $80 million previously. In addition, we have
raised our F1999 EPS estimate to $1.65 from $1.45. However, we believe actual earnings could reach as high as $2.00.
We remain confident regarding our estimates for the September quarter. We believe there could be slight surprises across the board from subscriber growth to cash flow.
Looks like they said increase from $1.45 to $1.65, could reach as high as $2.00. Not lowered from $2.00, unless this report is old news already (two days).
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