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Technology Stocks : America On-Line: will it survive ...?
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To: Allen Plyler who wrote (67)8/19/1996 8:46:00 PM
From: Mark The Trader   of 13594
 
I thought I should make comments on their advertising campaign.
Any advertising they do is aimed at the new and inexperienced on-line users. The fact that people are getting something for free automatically will have people who dont know about the Internet sign up with AOL (a large % will eventually leave for better service). Problem is for AOL they really dont have a great reputation, something that they try to mislead people in their advertising.
No way will they be able to sustain the new subscriber growth that they have had in the past, and to top that off they will start to lose
a greater percentage of existing users. So what AOL will do is spend
even more money on advertising in a shrinking market for their type of service. Yes the subscriber base may go up but the percentage of new revenues will be less than the percentage increase in expenses.
This company has a P/E of 158 , Tech stocks have P/E ratios in the teens, data base companies have P/E ratios in the 30 to 40 range.
Someone who owns or is thinking of investing in this stock has to say,
can AOL really make enough money to support a P/E ratio that is more in line with other profitable companies, especially in the on-line business which is getting more competitive every day. Just wait till the cable and phone companies really get involved.
As for a take-over its a possibility but I would think something like that would happen when the stock was trading much lower.

Mark
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