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

To: Jeff Dryer who wrote (27411)	7/30/1999 2:28:00 AM
From: CCR	Read Replies (1) \| Respond to of 41369

Jeff, just a technical comment on your helpful model. The market cap should probably be translated to a share price using the actual shares outstanding at the time instead of the fully diluted shares. Although the options are most likely going to result in issued shares eventually, for market cap purposes it probably should not be assumed that they will. Of course, the 125 PE ratio offsets that.

To: Jeff Dryer who wrote (27411)	7/30/1999 5:09:00 AM
From: jk28	Respond to of 41369

Jeff, Good job. We all miss you on the gnet board. Have a good one and good luck investing. j

To: Jeff Dryer who wrote (27411)	7/30/1999 10:09:00 AM
From: Mr. Tomatohead	Read Replies (2) \| Respond to of 41369

nice work, thanks for the effort. Whether one agrees or not with your analysis, at least it is that. Analysis. Not BS or ad hominems or groupie exclamations or thinly veiled short-wishing. Posts like this are why SI is (usually, can be, ought to be) great. Put some info out there and let's talk about it. Thanks again.

To: Jeff Dryer who wrote (27411)	7/30/1999 11:12:00 AM
From: Steve Robinett	Read Replies (2) \| Respond to of 41369

Jeff, Glad to see someone actually talking about AOL on this thread. I have a few cavils about your model. 1) You assume a 75% compounded revenue growth rate. There is still a substantial issue whether AOL's revenues can grow in any other way than by growth in its subscriber base. Until two quarters ago, "Other Income" ran at about 16-18% of total income, showing some seasonal variation but overall consistent. Two quarters ago, non-subscriber-fee revenues jumped to about 21% of total revenues. Ah, ha, thought I, the much anticipated leverage of AOL's customer base has begun. In the most recent quarter, other revenues again came in at about 21% of total revenues. Both these quarters incorporated NetScape with a higher percentage of higher margin businesses. So, for the time being, there is still no evidence AOL's revenues can grow other than in proportion to subscriber growth, though the high margin "other income" does generate better cash flow. 2) If AOL only grows revenues by growing subscribers, your 75% compounded growth rate requires that AOL requires that over the next three years, AOL go from 17 million subscribers to 91 million subscribers (1.75^3 * 17). Ain't gonna happen. 3) You assume a P/E of 125. Why? You assume a growth rate of 75% and P/E usually has something to do with growth rate. 4) You discount your 2002 target price back at a 20% rate, arbitrarily assuming a 20% return target. Valuation models for net stocks are notoriously difficult to construct rationally. I could construct convincing models that AOL is worth $30/shr or $200/shr and all those models would tell us is that high-growth companies in with emerging technologies are difficult to values. Here's a very interesting article about a professional net stock analyst whose valuation methods show his head solidly up his butt. iionline.com Best, --Steve