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Technology Stocks : America On-Line (AOL)

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To: Jim Croci who wrote (12374)	4/22/1999 8:20:00 PM
From: MoonBrother	Read Replies (2) of 41369

12:47pm EDT 22-Apr-99 Lehman Brothers (Brian Oakes (212)526-3557) AOL America Online: Expect Another Strong Quarter Ticker : AOL Rank(Old): 1-Buy Rank(New): 1-Buy Price : $142 3/4 52wk Range: $176-17 Price Target (Old):$100 Today's Date : 04/22/99 Price Target (New):$100 Fiscal Year : JUN ------------------------------------------------------------------------------ EPS 1998 1999 2000 2001 QTR. Actual Old New Old New Old New 1st: 0.02A 0.07A 0.07A - -E - -E - -E - -E 2nd: 0.02A 0.09A 0.09A - -E - -E - -E - -E 3rd: 0.04A 0.10E 0.10E - -E - -E - -E - -E 4th: 0.06A 0.11E 0.11E - -E - -E - -E - -E ------------------------------------------------------------------------------ Year:$ 0.14A $ 0.36E $ 0.36E $ 0.60E $ 0.60E $ - -E $ - -E Street Est.: $ 0.34E $ 0.35 $ 0.53E $ 0.54 $ 0.78E $ 0.88 ------------------------------------------------------------------------------ Price (As of 4/21): $142 3/4 Revenue (1999): 3.8 Bil. Return On Equity (99): 30.3 % Proj. 5yr EPS Grth: 50.0 % Shares Outstanding: 1120.0 Mil. Dividend Yield: N/A Mkt Capitalization: 144.13 Bil. P/E 1999; 2000 : 357.5 X; 214.5 X Current Book Value: $1.08 /sh Convertible: YES Debt-to-Capital: 23.6 % Disclosure(s): G ------------------------------------------------------------------------------ * We expect another strong quarter from America Online when it reports earnings on April 27 after the close. We expect the company to slightly exceed our EPS estimate of $0.10 (for America Online standalone, excluding Netscape). * The key surprises should be subscriber growth of 1.7-1.8 million, higher gross margins, and a backlog of advertising in excess of $1 billion. After the report, we believe Street estimates should move higher. * This quarter will include the Netscape acquisition; thus, reported revenues should easily exceed our $1.025 billion estimate. Revenues from advertising and e-commerce should exceed our $181 million estimate. * We believe the strong subscriber growth is a result of an increase in users coming online, coupled with the company's increased market share and lower churn rates, possibly indicating a new level of growth. * Lastly, after the close, Sprint Corporation (FON - 105 3/8; rated 1) filed to register the 28.8 million shares of America Online it owns, which could overhang the stock. We would use this as a buying opportunity into next week's earnings report.

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