America On-Line: will it survive ...? Message Board

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Technology Stocks : America On-Line: will it survive ...?

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To: Investor-ex! who wrote (8819)	3/15/1998 8:50:00 AM
From: yard_man	Read Replies (1) of 13594

Investor-ex! I think that was very good response. I think also there is the issue of valuation. AOL may go forward and be profitable and still not 'catch-up' to the stock's valuation. Is it really worth this much even if advertising starts growing at some sustainable clip? I have some serious doubts. I keep thinking about playing it to the downside, but not sure if it is time yet. The idea that the trend is UP, UP, and UP, and will continue to be, is pure nonsense. This is part of the cycle that NSCP has already been through. The attraction of this stock as a short is the very real probability that within 1 year or so it will be significantly repriced downward. Case knew this or he wouldn't have sold. It is round two. For the first round, AOL didn't fall under its own weight, came out as a leader providing the internet to "dummies" (no offense meant here, Case takes pride in this in the Fortune article) but it has consumed massive amounts of capital to do so. Any failure to grow advertising revenues very rapidly or contain costs servicing members will result in losses that cannot be hidden. I think the advertising dollars may come for the short term, however customer growth and service issues may be what puts the dent in this one. Telcos are in the unenviable situation of having infrastructure costs (internet) which they are not reaping optimum profits from. They are not going to be sitting on their hands much longer. Who really knows how much AOL's content and ease of use are really worth until the competition gets heated as it appears that it is going to shortly? Lets look at actual numbers of customers 6 months to a year from now.

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