AOL stock gyrates ahead of earnings report
Reuters Story - October 27, 1998 15:26
NEW YORK, Oct 27 (Reuters) - Shares of America Online Inc. rose on Tuesday in anticipation of better-than-expected quarterly earnings and a possible stock split, but then the stock slipped back in volatile dealings ahead of the company's results due out after the close of trading.
Traders said "whisper" numbers circulating among investors for AOL's fiscal first quarter ended in September ranged from 25 cents to 28 cents per share. That is several cents ahead of the 23 cents per share consensus projected in the latest survey from First Call, which compiles broker estimates.
By late afternoon, AOL stock was down 11/16 at 118-7/8 in New York Stock Exchange trading, on volume of 7.2 million shares, after trading as high as 124 earlier in the day.
Shares of AOL, the leading Internet services company, have been on a tear since the October earnings season began in the second week of this month, gaining nearly 50 percent in value. Still, the stock remains below its record high of 140-1/2 set in late July.
"The stock's had a nice run," Goldman Sachs analyst Michael Parekh said. "In general, the expectation is that they should have a good quarter," he said.
But Michael Murphy, editor of the California Technology Stock Letter, said that gains in the stock "could end rather abruptly today if AOL disappoints."
Still, he noted, "There is a whisper number of about 28 cents for AOL and that has got everybody excited."
So-called whisper numbers refer to informal earnings expectations circulated among traders but not supported by published estimates from Wall Street brokerages.
Another trader said the whispered earnings expectation is "the same thing everyone else is hearing: 25 cents."
He added, "I think they are going to split either two-for-one or three-for-one."
Parekh has estimated that AOL will see revenue of $845 million, up about 60 percent from the $521 million reported in the September 1997 fiscal quarter.
Included in the total will be an estimated $137 million in so-called "other revenues," the returns on its electronic commerce and advertising business, he said. The bulk of AOL revenue comes from its core Internet service business.
The Goldman analyst projected membership growth in its online services to climb about 677,000 subscribers to around 15.3 million members worldwide, including its CompuServe service. By contrast, AOL added about 600,000 members in the year-ago period.
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