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Technology Stocks : America On-Line: will it survive ...?
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To: Sam who wrote (5060)10/15/1997 3:55:00 PM
From: John Kratus   of 13594
 
AOL vs. IOM

Why does the street love America Online and hate Iomega? AOL's nearly incomprehensible earnings statements almost always disappoint through restatements that turn earlier profits into losses. IOM's real earnings are growing at a fast clip and almost always beat street estimates, for the few brokerage houses that follow IOM.

Why does AOL get repeated reiterations of buys while IOM is ignored or spoken of derisively? Why do institutions own over 75% of AOL and less than 15% of IOM?

I think the answer is simple. Wall Street discovered AOL, and online investors discovered IOM. Don't underestimate the fear and loathing that WS has for internet investment chat. Oppenheimer, First Boston, Merrill Lynch and other big brokerages aren't making any money selling their over-priced, under-researched research, if investors can get the same or better information from places like SI or Motley Fool. (BTW, I think that the Fool's touting of their employer, AOL, is shameful!)

So WS keeps pushing its higher estimates, which become self-fulfilling prophesies, which require higher estimates. The institutions play along, knowing that those reiterated buy signals will keep their money safe for a while.

The system stinks, and so does my short position in AOL right now. My intuition led me to think that 85 was the top last week. I was wrong.

John
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