America Online: Still as Strong as Ever
by Chris Bulkey 8/16/99
Rarely does an Internet company qualify for our list of America's Fastest Growing Companies (AFGC).
Yet, thanks to a highly profitable business model that is being fueled by high margin advertising revenue, America Online (NYSE:AOL - news) posted AFGC numbers for its fiscal fourth (June) quarter.
Now, we certainly don't think that at this point earnings will continue to grow at a better than 100% rate. However, the company has built a dominant franchise in interactive services and original content. Although there are some concerns surrounding the company's future, with the shares trading around $96, nearly 50% below their 52-week high, we think investors have a unique opportunity to build a position.
Fourth quarter results were impressive. Revenue increased 46% to $1.38 billion while earnings soared 160% to $0.13 per share, $0.02 per share ahead of consensus forecasts.
Adding a boost to profitability was the growth in advertising revenue, which carries higher margins than traditional subscriber based sales. As a result, gross margins improved sequentially to 46.2% from 45%, while operating margins increased to 16.4% from 11.8%, showing that the business model possesses excellent leverage.
Revenue from advertising and electronic commerce almost doubled to $306 million from $164 million.
fnews.yahoo.com
|
