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

To: Jeff Dryer who wrote (27441)	7/30/1999 3:06:00 PM
From: Steve Robinett	Read Replies (1) \| Respond to of 41369

Jeff, I liked the Netscape IPO story. There is a certain amount of guessing at valuation even when you're using, say, a capital asset pricing model on a public utility, though a lot less guesswork than net stocks. You comment that For AOL to grow revenues at 75% year, AOL will likely need to increase advertising and ecommerce revenue at more than 100% per year. Assuming a 50% subscriber growth rate over the next year from the current 17 million to about 25 million, a 100% increase in ad/ecommerce revenue would result in about 26% of total revenues coming from ad/ecommerce. If that actually happened, I would be very impressed and, depending on the reason for the increase, start thinking perhaps AOL could get some leverage on its subscriber base. IOW, if we got evidence of growth beyond linear addition of subscribers, I would be the first to find it significant. BTW, I think you're right, Wall Street is looking for about 50% growth out of AOL. Next year, okay. Beyond that, cyberspace is changing too fast for me even to guess. About analysts, you comment, Often times an analyst issues a STRONG BUY recommendation, but if you read the report, it's only predicting investors will earn 10 percent a year. Absolutely right. In the case of AOL, analysts were very late getting on board, then decided they had a Blue Chip (even though there is a technical definition of a Blue Chip and AOL comes nowhere near it), then, after they had sold AOL to all their clients, fund and individual, the stock was a 175 and began heading south, so they had to reiterate their reiterations of buy recommendations or look like smucks to their clients. It's the same psychology that prevents many outright sell recommendations from being issued. Now, with AOL at about 100, they're all striking a cautious note--I heard one today on CNBC--and are probably wrong again, at least short-term. Best, --Steve