How Merrill says buy:
Wednesday October 17, 12:00 pm Eastern Time
RESEARCH ALERT-Merrill cuts AOL rating to neutral
NEW YORK, Oct 17 (Reuters) - Long-time AOL Time Warner Inc. (NYSE:AOL - news) bull Merrill Lynch said on Wednesday that it was cutting its mid-term rating for the company to ``neutral'' from ''buy,'' amid concerns about growth at the company's AOL Internet unit.
``While reported revenue and (earnings before interest, tax, depreciation and amortization) were in line, we are concerned with underlying trends at AOL,'' Merrill analysts Henry Blodget and Jessica Reif Cohen said in a research report
``Segment AOL revenue and EBITDA fell short of our estimates, with Q3 revenue of $2.2 billion below our $2.3 billion estimate and EBITDA of $742 million well below our $914 million estimate,'' they said.
They said that AOL revenue and EBITDA were weaker than expected due to a 12 percent sequential decline in advertising and commerce revenue.
The sudden drop may be the due to the rolling off of long-term contracts priced at the height of the online advertising market,'' Merrill said. ``As a result, we are not optimistic about a near-term recovery in AOL's adcom revenue.''
In pre-market trading, the company's shares rose to $33.75 on the Instinet market from $33.50 at Tuesday's close. |
