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

To: Saul H Rosenthal who wrote (10592)	7/12/1998 9:22:00 AM
From: The Duke	Respond to of 13594

But noone expects the earnings on AOL to stay constant. Do you??? No. I myself expect that eventually AOL's accounting tricks will catch up with them and their real operating earnings will go back below zero, where they really have been all along. smile

To: Saul H Rosenthal who wrote (10592)	7/12/1998 1:58:00 PM
From: J. P.	Read Replies (1) \| Respond to of 13594

< In the quote from Peter Lynch he repeats several times "if the earnings stayed constant" or something like that. But noone expects the earnings on AOL to stay constant. Do you??? Really?? > I read that also, and interpreted the meaning to be that stocks which exhibit quarter over quarter incremental increases in revenue can be afforded higher PE's. Of course a stock with static earnings wouldn't be a good investment at a high PE. Also, i think that PE is a terrible measure on which to base your investment decisions. I think top line growth, EPS growth, and margins are far more telling. Obviously if the company suddenly begins to show a slowdown in earnings "The Street" will suddenly and viciously cut its market cap.

To: Saul H Rosenthal who wrote (10592)	7/12/1998 10:01:00 PM
From: Keith A Walker	Read Replies (1) \| Respond to of 13594

You are correct Saul. However, quarter to quarter, aren't AOL's earnings estimates only running at about a 10-15% increase? With a P/E of 300+ you really need to be doubling earnings every quarter to keep this type of P/E attractive. P/E is not everything, but earnings, in the end are. And Wall Street will punish those companies who miss earnings or raise any doubt about their future prospects. Of course, there are other factors to consider. I believe AOL's lead as an ISP is eroding on a daily basis. And their issuance/sale of 5,000,000 new shares from their universal shelf registration, without any real explanation, the proceeds of which were placed into an interest bearing account, strikes me as a little odd. Needless to say, my short position is not paying off, but I am less scared about being short on AOL than long on CSCO. Regards, Keith