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Technology Stocks : AMERica on-Line, Another over valued company?
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To: Frank Chen who wrote (113)6/6/1996 8:35:00 AM
From: Zoltan!   of 222
 
WSJ's Heard on the Street - "AMERICA ONLINE MAY FACE LONG, HOT SUMMER AS STOCK WILTS 10% ON BEARISH REPORTS".

Article noted:

1) Yesterday's selloff was on volume FOUR TIMES NORMAL level.

2) Montgomery's downgrade was notable since the firm had previously been among the biggest boosters of the stock.(Dowvision)

3) Yesterday Cowen & Co. slashed subscriber-growth forecast "nearly in half".

4) "Top insiders are selling rather than buying".

5) AOL maintains its lull in membership is seasonal and it will focus on its rapid "churn" or loss of members. However, those who follow the stock know that much higher growth was made last summer and believe AOL is trying to disguise what is "the real story" - that "subscriber growth is fading".

6) "Dramatic" negative impact on revenue that will result from the discount plan that takes effect on July 1.

What's really interesting is the comments of those analysts who are still bullish on AOL. Their AOL-supporting comments can safely be categorized as FAITH. You can't argue with faith but in this case I would not stake my position on someone else's faith.

Frank, a bounce should be expected but it does look more and more that this one is poised for a long slide.

I ask, what normally happens when a stock notable primarily for its growth can no longer maintain that growth rate, much less experience a substantial drop as is predicted for AOL ?

AOL's multiple is wildly out of line. AOL is a vastly over-valued stock.

Regards
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