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Technology Stocks : America On-Line (AOL)
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To: tang who wrote (7724)3/24/1999 9:47:00 AM
From: Arik T.G.  Read Replies (4) of 41369
 
Thank you, tang.

Although not many on this thread are buying or holding AOL on fundamental grounds, I feel compelled to shatter the fundamental case of many bullish analysts.

It's that simple- there's an upper limit to growth.
Let's find out what that limit is for AOL-

Let's assume that each and every family in America that can afford it, will have 1.2 AOL subscribers. That's 100 million subscribers upper limit, or six times today's number. EBITDA should be what? $6-7B? let's say $10B.
Remember, there is NO GROWTH from the upper limit. So a multiple of 8 on the EBITDA is more then reasonable.
That gives you an upper limit of $80B market cap for AOL when it reaches its growth limit. Long term best case scenario. And if this scenario has 100% to materialize, current AOL market cap should not exceed $60B, or half of its current value.

The prosecution rests.

ATG
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