Earnings? Right.
The WSJ, in the Intrinsic Value column today, has an amazing and scathing article concerning how many analysts have accepted AOL's hype, hook, line and sinker.
interactive2.wsj.com
"They have had a tough ride, from $70 to $25, but that is no shame. They
also liked AOL on the way up, and every analyst misses a call. The shame
is that information that could have led them to exit AOL at the top was
in front of their face, but its seeming importance was minimized by
AOL's aggressive accounting and relentless spinning of Wall Street."
"Every Wall Street analyst -- bull and bear -- was of course aware that
AOL was deferring its marketing costs. Bulls will now reply that as the
numbers were known, the accounting form was irrelevant to their
analysis. But the bulls dismissed the accounting issue while
enthusiastically trumpeting AOL's reported (now vaporized) "profits." By
calling them profits, they tended to overlook or minimize that AOL was
in a price war with Internet access providers and spending more cash
than it was taking in. Alex. Brown analyst Steven Eskenazi now says, "I
never claimed AOL earned a dime." But his reports uncritically reported
their profits. "While we have NEVER positioned AOL as an earnings
story," he wrote in June, "we can't help but be tempted by its 1997 P/E
of 42 times." Last week, the night before AOL's announcement, the
company wined and dined Alex. Brown and other favored analysts at
Manhattan's Essex House. Next morning, as AOL was overhauling its
accounting and corporate alignment, the analysts were magically ready
with new earnings forecasts (caveat emptor) through 1998. In the
Internet business, in which AOL is certainly a legitimate contender for
subscriptions, advertising, content and merchandising sales, 1998 is a
long way away."
"Various neutral analysts have had less access to AOL, but distance has
served them. Cowen & Co.'s Jeff Goverman wrote in March, AOL "may be
losing money on each subscriber." Smith Barney, Off Wall Street
Consulting Group, and others, said similar. Perhaps, AOL should have
paid attention. Having a stock in the stratosphere reinforces any
management's tendency to believe it is on course, marketing wisely, etc.
AOL's Mr. Leader vigorously disputes that AOL spins the news. "This
company has been very forthright. We should be commended for
acknowledging mistakes and reaching out" and talking to investors,
bullish and otherwise, he says. Maybe. But the danger in spin artistry is always that the spinner will believe the spin."
- There is much more there, all accurate and all negative on AOL.
Bulls on this thread have stated that AOL's writeoff of their marketing expense "asset" put that issue behind them. It did not.
As I stated back in April and continue to say now, AOL's valuation cannot withstand analysis, except by those who parrot AOL's hype and spin at every turn. Speaking of the latter, my first posts concerning AOL were motivated by what I read in the Motley Fool, certainly among the worst offenders re: AOL.
Regards |
