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Technology Stocks : America On-Line: will it survive ...?
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To: M.J. who wrote (10874)8/2/1998 1:12:00 PM
From: Bharat Kalra  Read Replies (2) of 13594
 
Your analysis is way offmy friend. The way to value AOL is not on an earnings basis currently, even though it will achieve that level more quickly then people think. The way to value AOL is on a subscriber basis. Let's say AOL currently has 15 million subscribers, which I may add is a very conservative estimate, since at the end of last quarter they had 12 million excluding their compuserv members. AOL has a market cap of $25 billion. This values each subscriber at $1700. This value is much less than what cable subscribers are being valued at. The recent AT&T TCI deal valued each sub scriber at more than $3000. Note this valuation excludes AOL's other sources of income, namely advertising and sponsorships which is proving to be a great source of revenue and income with limited incremental expenses.

Note , this is a great business model. Once AOL has built the infrastructure, they collect monthly rents. Note the way they collect their rents, they get their money upfront because they let users pay by credit card. Thus they have huge cashflow they are generating.

sorry for thelong blown out anlysis. But anyone that says that AOL is not worth what it is trading for is only fooling themself. I fooled myself until recently, where I was able to get comfortable with the valuation by doing this type of analysis.

regards,

sonu
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