The earnings are overstated but probably not by too much.
The expenses deferred to the future is partly adjusted by
the expenses deferred from the past.
It's really more important to estimate how large the subscriber base
can grow. The bottom line is, that the online service is value-added
business with intermediate barrier of entry for competitors. When
the industry gets mature, they are expected to earn around 6%
profit. For long term investment (fundamental wise), the question
is, eventually, how many people will become steady subscribers, 10 million,
50 million, or 100 million.
My guess (as a short seller) is it's conceivable that they can do 20 million.
That translates into 6 billion annual revenue, or 360 million earning.
So the market is valuing AMER 15x furture earning now. Then, take
into consideration of further dilution, competition, etc, the stock is
really ahead itself.
Then, again, never underestimate what a smart management can do. I'm
holding my short position not without worry, but not enough worry to bother
my sleep just yet. |
