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

To: Time Traveler who wrote (30403)	9/6/1999 8:33:00 PM
From: Walcalla	Read Replies (2) \| Respond to of 41369

The-Adviser.com The Place to Come for Answers? AOL - Anything Good on TV On? Independent Buy-Side Research By The-Adviser.com - Monday, 9/6/99 Stock Quotes Basic Detailed Chart Research New York - In the past several weeks, AOL has announced that it intends to go into the TV business. To us, it makes perfect sense. AOL's proprietary content will be of great value to high-speed Internet access providers such as AT&T's cable service. AOL believes, as we do, that the Internet of the future will be more graphical, more video integrated and will have greater interactivity between the end user or customer and the access provider or business supplier. Since the business model seems right, we had our analysts estimate what the future stock of AOL would be worth once the TV model was fully implemented. We assumed that revenues and profits from access fees for AOL's proprietary content would decline to zero in five years and that revenues and profits from advertising and e-commerce revenues would replace the loss of access fees in the same amount. We then compared the pro-forma valuation of AOL to several companies that own television stations. Here are the results of this simple exercise: Current AOL stock price $90 $90 CBS Disney AOL current mkt cap $ 101.0 $ 101.0 Market value of CBS/Disney $ 33.6 $ 57.0 Difference $ 67.4 $ 44.0 Divide by # share's outstanding $ 1.1 $ 1.1 Decline in AOL stock in future $ 61.3 $ 40.0 Est of FV of AOL's TV stock $ 28.73 $ 50.00 Assuming the TV model completely replaces the annuity access revenue model, we estimate that AOL would be worth between $28.73 to $50. We considered CBS, which is currently valued at $33.6 billion and generates $7 billion of revenue. Going back a few years ago, we considered the fact that Disney paid $19 billion for ABC Television when ABC had $2 billion of revenue. Give credit to AOL for its content, e-commerce lead and brand name and assume it equals the value of Disney's amusement parks and cartoon characters (not to mention goodwill). The end result, we estimate that AOL is worth at most $50. That is a $40 drop from yesterday's closing price. Our short term rating on AOL is AVOID with a long-term rating of NEUTRAL. Our EPS estimates, which assume no loss of access revenues, are indicated below: Q1E Q2E Q3E Q4E Year 2000 EPS $.13 $.14 $.15 $.16 $.58