Yikes: A friendly bear- what a rarity on this thread. That makes at least 2 of you [hi investor-ex]. A very insightful post. I am a long time bull but admit I can't justify the valuation at this time, though I'm far from convinced that this co is on the verge of a major tanking. IMO too much is still up in the air to make a definitive case either way at this time and price. A few points for your consideration.
1. Subscribers-- bears question the sub # . I don't. I don't see how aol could have had such access problems unless a huge customer base was swamping the system. Even now , despite a massive amount of investment in pop's there still are occasional problems though, not nearly as bad. Where I live on Long Island I once had 4 #'s to choose from , now I have at least 10. Whether aol can continue to grow their sub base is the critical question and there I can only say they have done a masterful job so far. If and when I see problems in sub growth I will reevaluate. My guess is you will see subs hit the 10000000 mark by the end of the year. We will see.
2. Accounting restatements-- this is an industry in the early stages of creation and it is very understandable that certain income and expense items might get reclassified as the business model gets better defined. I'm not sure who the auditors are{ guaranteed big 3} but in no way would they have intentionally mistated #'s or let aol lead them the wrong way. They are professionals and have reputations at stake which they would never jeopardize for one co. This is a non- issue.
3. Brand name--I read on this thread that aol has poor service and no brand loyalty. I'm here to tell you this is not true . I and many people I know love aol and have no intention of leaving. In time I'm sure aol will be as state of the art as any isp out there and at the present time it's capability's are quite adequate.
4. Management-- Steve Case et. al. have done a masterful job so far and I don't see any reason to doubt that they won't be able to adapt to a constantly changing business climate and do whatever is necessary to broaden and strengthen the huge lead that aol has created in this market.
Now, do these points add up to a 10.5 billion $ market cap? Who knows- we will see. I wouldn't buy it here but I already made my money. But IMO aol has yet to show any cracks in it's growth. If and when it does, the valuation will come down but until then you are playing with fire. Be careful you don't get burned along with everyone who has been shorting this baby for the last 50 pts. After all if the price was absurd at 40,50,60,70,80,and 90 it could just as easily be more absurd at 110,120,130,140 etc.
Regards, MW |
