Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : America On-Line (AOL) -- Ignore unavailable to you. Want to Upgrade?

To: Roy F who wrote (20891)	6/8/1999 5:20:00 PM
From: Dr. Zax	Read Replies (4) \| Respond to of 41369

HUH??? I thought these guys were supposed to be good at analysis. I am a bull on AOL long term, but this article doesn't really follow. When interest rates go higher, the businesses that hurt are the ones that make luxury items and "extras." While, as a college student, I couldn't live without my internet connection, I think most people still view the internet as a luxury item. It is easy to decide to no longer pay $20/month for access. I think if there were a substantial rise in interest rates, or a slow down in the economy the loss of new and current members will be far greater than the gain from a little more interest on the money that these "cash cows" hold. I don't understand the premise behind this article, could somebody explain it to me so that it will make sense. Or is it truly just a piece of hype from BancBoston? Dr.Zax _____________ Rising rates a boon to 'Net stocks - BancBoston June 8, 1999 12:16 PM By James Saft LONDON, June 8 (Reuters) - U.S. Internet stocks face little danger from rising interest rates, and some cash-rich companies will actually benefit, a prominent analyst said on Tuesday. "The weirdest thing is that given how much cash each of these companies have, the best thing for them is rising interest rates because it will inflate my earnings estimates," Keith Benjamin, BancBoston Robertson Stephens analyst told Reuters in an interview. "I think that we are going to have a five percentage point (interest rate) move to get anybody to switch allocations," said Benjamin, in London to speak to investors. Traditionally, higher interest rates are seen as bad for high growth sectors such as the Internet because they reduce the current value to investors of future streams of earnings. The American Stock Exchange Internet index has fallen some 18 percent since April 27, during which time yields on 30-year Treasuries rose 0.40 percentage points to 5.97 percent. The fall in some stocks has been far steeper, with Amazon.Com AMZN falling 42 percent to 120. Benjamin said many Internet companies are highly cash generative and will see higher interest income as bond yields rise. "American Online AOL now has $2 billion in cash. Network Solutions Inc. NSOL have $200 million in cash and generates cash on a $30 million a quarter run rate," said Benjamin, one of the most visible Internet analysts. He took issue with the assumption that a slowing economy might disproportionately slow Internet revenues. Internet companies "are targeting the consumer with something that is more convenient and cheaper so in a tougher economy it is more likely that you will buy something on the web." <i/>