01:53pm EDT 14-Apr-99 ABN AMRO (Scott W. Appleby 212/314-1164) AOL
Subscriber base growing like weeds; AOL passes 17 mil. mark; Earnings preview
Subscriber base growing like weeds; AOL passes 17 mil. mark; Earnings preview
ABN AMRO -- Research Notes
Subject: America Online, Inc.
(AOL--$159.313)--NYSE Opinion: OUTPERFORM
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Analyst: Scott W. Appleby 212/314-1164
Akhandal (Bob) Parija 212/314-1937
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Date: April 14, 1999
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Market Profile
52-Week Range $176-$17 | EPS Growth Rate (3-5 Yrs.) 65%
Avg. Daily Volume 22,675 M | ROAE (LTM) 8%
Shares Outstanding 934.0 MM | Debt to Total Capital 46%
Market Capitalization $148,798 MM | Book Value Per Share $0.48
Floating Market Cap. $135,406 MM | Indicated Dividend/Yield None
Institutional Owner. 79% | Revenue (LTM) $2,936 MM
Insider Holdings 9% |
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Earnings/Share Fiscal Calendar Calendar
1Q/Sep 2Q/Dec 3Q/Mar 4Q/Jun Year Year P/E Ratio
------ ------ ------ ------ ------ --------- ---------
1998 $0.02 $0.02 $0.04 $0.06 $0.14 $0.25 NM
1999E 0.07A 0.08A 0.10 0.11 0.36 0.49 NM
2000E 0.13 0.15 0.16 0.18 0.62 0.76 NM
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Highlights:
* AOL adds another one million new subscribers bringing the total to over 17
million worldwide
* New subscribers translates into (1) higher subscription revenue and (2) more
eyeballs that provide leverage when negotiating with advertisers/merchants
Our EPS estimate for 3Q is $0.10 compared with the consensus of $0.09
Today's news gives us much greater confidence that AOL will beat our EPS
estimate by a wide margin
Maintain Outperform rating
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Today, April 14, 1999, AOL announced that its membership grew by another
million reaching a total of 17 million new members. It was just 64 days ago
(February 9, 1999) when the company announced it passed the 16 million mark and
just 104 days ago (December 30, 1998) when the company announced it passed the
15 million member mark.
Conclusion: AOL's 17 million subscribers is approximately 300,000 more
subscribers than our estimate for this time frame. While it is unlikely the
company can sustain this pace given the seasonal slow down during the summer
months, it is interesting to note that if they could, they would have close to
22.2 million subscribers by the end of calendar year versus our calendar year
forecast of 20.1 million subscribers. We think it is likely the total number
will come in somewhere between 20 and 22 million subscribers.
The bottom line is fairly straightforward: more subscribers mean more subscriber
revenue; and more subscribers mean more eyeballs, which is attractive to both
potential and existing advertisers and online/offline merchants. We believe AOL
has and will continue to leverage these results in its negotiations for
advertising on its various branded properties and merchant sponsorships related
to AOL Shopping.
Our EPS estimate for 3Q is $0.10 compared with the consensus of $0.09. Today's
news gives us much greater confidence that AOL will beat our estimate by a wide
margin.
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