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Technology Stocks : America On-Line: will it survive ...?
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To: Bald Man from Mars who wrote (8330)2/27/1998 11:07:00 AM
From: rhet0ric  Read Replies (3) of 13594
 
This dog has had its day

[I posted this on Motley Fool, and am reposting here for comments].

Rating this stock purely through Motley Fool means, AOL has had its day. The only way I see making any money in AOL is by shorting it. I say this for two reasons: bad product, and bad stock fundamentals.

Bad Product:

AOL is a proprietary network that hooks into the general Interent via a gateway. As such, its performance and compatibility as compared with the Interent in general is sub-par. These things are only likely to continue as the Internet expands, innovates, and becomes a worldwide standard. In addition, AOL offers an abysmal user experience. AOLers have more trouble getting online due to busies, and are bombarded with spam and ads. As Internet users become more sophisticated, AOL will come to be seen as a low-end irritating service. Add to that the fact that AOL is now pricing itself *above* its competitors and you have a situation where the product is simultaneously lower quality *and* more expensive. All this tells me one thing: churn will increase, costing AOL a fortune and lowering its revenues over time.

Bad Stock:

According to my calculations using the pegulator, AOL has a PEG of 1.8. The Motley Fool tells me to short any stock higher than 1.7 unless there's some good reason not to. The above analysis of AOL's product tells me that, if anything, AOL's future looks bleak.

Summary: short this stock ASAP.

rhet0ric
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