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: larry who wrote (22084)	6/14/1999 5:09:00 PM
From: David E. Taylor	Respond to of 41369

We hit almost 40 million shares today, not quite enough IMO, maybe tomorrow we'll hit bottom. There's been a lot of discussion here, both of what the low will be, and how to arrive at a "fair" valuation for AOL, which might give some guidance about how low we might go. FWIW, and to maybe encourage some productive discussion, I have a couple of "targets" worth considering: (1) The data I've seen places a value of about $5000 per subscriber on cable subscribers, $2000 per local telco subscriber, the higher valuation on cable subscribers being because their eyeballs are worth more (advertising etc). Using the higher valuation for an AOL subscriber, approximately 20 million subscribers, and about 1.1 billion shares gives us around $90/share as a "fair" value for AOL. Two weeks ago, I sure didn't expect AOL to get to 90, but here we are. Am I going to sell my remaining AOL here? Not likely, firstly because the valuation becomes compelling at around 90, secondly because I'm not about to meekly hand over my remaining holding to the big guys who seem to more than willing to soak up AOL at his level (see my earlier post on the Thomson I-Watch data). (2) If DELL's recent slide is any guide, the over selling here might get us about 10% below the 200 DMA, or about 69. (3) The worst decline in AOL's history (to my knowledge) was in 1996. Between 4/30/96 and 7/24/96, AOL slid from a high of around 68 to 24 (corrected for three 2:1 splits). It then took 4 months until 11/96 before AOL began its long climb out of those depths to its current levels. We've had a couple of major drops since, but none as bad as 1996. 1996 was about a 65% decline, and a comparable drop from the 175 high on 4/6/99 gets us to a low of about 61. Since we've already busted the 90 level in (1), we may easily drop way down into the 60's as suggested by (2) and (3) before we get a decent recovery. If anyone is looking for the "worst case" sell-off, I'd use the 61-69 levels to judge if you can stand it or not. Of course some good positive news from AOL or from the market generally, or the institutions deciding this is as good as it's going to get and buying big again, could get AOL back up in a hurry, but IMO that's more a hope than a strong possibility. If you look at DELL, you'll see that regaining the lofty heights is likely to take AOL some considerable period of time. If you're going to sell, for goodness sake do it tomorrow and get this over with! David T.