AOL thinks its shares are cheap
Online service 'very comfortable' with estimates
By Tom Murphy, CBS MarketWatch
SAN FRANCISCO (CBS.MW) -- Are America Online shares about to scream higher? The company thinks so. CFO Len Leader told an audience of money managers on Monday that the world's largest online service providers sees its share value rising to $149.50.
That's more than double their current price.
Leader gave the estimate at the Hambrecht & Quist technology conference in San Francisco. He also said the company (AOL) was "very comfortable" with earnings estimates of 12 cents a share for the quarter that ended March 21. That figure excludes three separate charges that are expected to total less than 24 cents a share.
Investors weren't impressed. AOL shares fell 1 5/8, or 2.2 percent. to 72 7/8. Other Internet stocks fell 2.5 percent.
AOL, with 12 million members, is a continued target of critics who say Internet users eventually will find cheaper online access through other Internet service providers. Yet the Dulles, Va.-based company continues to defy its detractors; Leader said AOL members now account for 52 percent of all Internet use from the home, and Leader clearly sees the good times rolling on.
He said the proliferation of cheaper personal computers will mean a much larger market for companies with strong brand names. "Certainly, AOL expects to capture a disproportionate share because, whether its online or offline, brands win," he said.
Earnings outlook
Leader said the consensus estimates on Wall Street are that the company would have revenue of $682 million for its fiscal third quarter, which ended March 31 -- a 52 percent increase from a year-ago, resulting in pre-charge earnings of 12 cents a share. The charges include an estimated $10 million for in-process research and development; $25 million for the reorganization of its studios, and an additional charge stemming from its CompuServe acquisition that is expected to be somewhat less than $25 million.
Assessing the company's share price, Leader said the company's projected U.S. membership of 14 million for the coming year alone would suggest a value of $87 a share. He valued the company's advertising and online commerce revenue at another $50 a share. International membership adds another $7.50 a share, and the company's investments and cash are worth $5 a share, he said.
That adds up to $149.50 for AOL shares. Whether it'll add up for shareholders is another question.
Double your money or nothing?
Beni Mick Mormony |
