America On-Line (AOL) Message Board

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Technology Stocks : America On-Line (AOL)

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To: RocketMan who wrote (3347)	1/25/1999 8:16:00 PM
From: Steve Robinett	Read Replies (2) of 41369

Rocket, You say but professional analysts using discounted cash flow analysis set a target of around $200.... The most recent quarter is the first with an actual cash flow, about $0.53/shr run rate operating cash flow. Due to AOL's odd habit of capitalizing items companies more often expense (e.g., software, in this case AOL 4.0) and expensing items many companies would capitalize, it is next to impossible to get an accurate free cash flow, but even if you use something like $0.23, you're still only talking about one quarter. Yes, in theory, AOL can ramp up cash flow dramatically in the future but at the moment the valuation assumptions anyone makes--including professional analysts--are speculative at best and more likely wishful thinking. There really are ways to value companies, but wishful thinking is probably the worst way. Best, --Steve

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