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Technology Stocks : America On-Line: will it survive ...? -- Ignore unavailable to you. Want to Upgrade?

To: jack rand who wrote (7875)	2/15/1998 9:34:00 AM
From: Labrador	Read Replies (1) \| Respond to of 13594

Barrons -- The Trader -- Feb 16th -- The America Online juggernaut rolled on last week after the company said it would boost monthly subscriber fees by $2, to $21.95, and then announced better-than-expected profits of 17 cents per share for the latest quarter. AOL's stock surged 15 3/4 points, to 114 1/4, after hitting a record 117 7/8 Thursday. Wall Street loved the fee increase, viewing it as a sign of AOL's pricing flexibility as the country's leading online service. The Street ignored AOL's own comment that the increase was needed to offset the cost of sharply higher usage under its flat-rate pricing policy. The average subscriber now uses AOL 23 hours a month, up from seven in 1996, boosting AOL's communications costs. At the same time, growth in advertising and electronic commerce hasn't been as strong as many AOL bulls anticipated. The quality of AOL's latest quarterly profits was poor, benefiting from a one-time reversal of communication charges and the sale of stock in Excite, the Internet directory company. AOL's margins were down in the quarter, and the company warned that current-quarter profits would be dampened by heavy usage. AOL, with its 11 million members, may have the dominant cyberspace franchise, but it still hasn't been able to make much money. Its stock, meanwhile, trades at 125 times projected profits in the current fiscal year ending in June. Legg Mason's star fund manager William Miller still favors the stock, but AOL seems mighty risky at current levels.