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Technology Stocks : America On-Line (AOL)
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To: Sonny McWilliams who wrote (9776)4/6/1999 11:03:00 PM
From: Jenne  Read Replies (2) of 41369
 
Other notable news was the disclaimer by AOL that they were not
about to announce a takeover of CBS. The concept baffles me but
evidently there were some real strong rumors about an announcement
on Wednesday. After AOL denied the rumor CNBC spared no effort to
knock the recent price rise of AOL. I am not saying they are wrong
but I do disagree with their running the spot over and over all
day long. The point was the current valuation of AOL as greater
than IBM, AT&T, Coke or Disney. At the high today AOL had a
market cap of $173 Bln. The market caps of the other companies
were IBM $169 bln, AT&T $168 bln, KO $147 bln, Disney $63 bln.
AOL is now the seventh largest company by market cap on the NYSE.
AOL made net profits of $92 million last year and IBM had net
profits of $6.3 billion. Why should AOL be valued for more than
IBM? If AOL continued adding 9 mln users a year, it's current pace,
it would take ten years to have 100 mln subscribers. If it made
$92 mln with 15 mln subscribers then you could project a $600
million profit ten years from now. This is a very simplistic
comparison but I think you get my drift. If you assume IBM is
fairly valued for a $6.3 bln annual profit then how many subscribers
and page views does AOL need to be fairly valued at the same price?
About 75 times more than they have today. Maybe CNBC is right but
I don't think they should take it upon themselves to be Internet
stock price monitors. OPTIONINVESTOR
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