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Strategies & Market Trends : Z Best Place to Talk Stocks

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To: Larry S. who wrote (39047)	4/7/2002 4:27:38 PM
From: Joe Stocks	Read Replies (1) of 53068

Larry, AOL. >What continues to be overlooked is the huge cash flow<< AOL has 4.4 billion shares outstanding. They currently show a net profit od -13%. Let's say that they did do well. For their business a net profit of 5 % would be very good for their industry. Let's say they make a dollar a share or $4.4 billion dollars and we give them a generous PE of 20 since their projected growth rate is near 10-12%. At $1.00 a share and a profit margin of 5% they would have to have revenues of $88 billion. Currently they reported $38 billion in revenues last year. How long do you think it will take them to grow another $50 bil in revenues? In the above hypothetical they would be fairly valued at $20 a share or 20 times earnings. AOL can have the best business in the world but eventually their earnings need to justify the stock price. The market continues to fall to find that point. AOL paid too much for TWX. AOL screwed their shareholders out of much equity. They should have waited for themselves to be acquired at a premium. AOL bought old economy dollars with new economy dollars and is taking a beating on it. If you take out the intangibles and get down to the bottom line of earnings and the number of shares outstanding you will see that AOL has significant issues in trying to justify a price that is even lower than it is now. I think AOL should be sold and not bought. BTW, I have no position. I just have a keen interest in business and am totally amazed that this merger past mustard with the AOL board. Steve Case had no concern for protecting shareholder value. AOL, the race horse, is now saddled with the 800lb. gorilla. Joe

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