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

To: Jorge who wrote (11468)	10/14/1998 1:44:00 PM
From: Jason Cogan	Read Replies (3) \| Respond to of 13594

Goerge: <<You never did answer my question...Do you want to see AOL at say $500 per share, yes or no?>> I thought I answered it, but let me try again. I don't think it is even remotely possible that AOL will see $500 per share, adjusted for splits or otherwise. At $500 per share, AOL would be valued at $125 billion dollars. $125 billion for a company that has never earned a penny in their entire history, but has rather accumulated $500 million in losses. $125 billion for a company that is facing increasing competition, and is being locked out of an increasingly important delivery mechanism (ie. cable). Your question represents the incorrect thinking that continues to surround the concept of stock splits. People have become conditioned to believe that stock splits inherently represent value, and therefore help to raise the value of the overall company. It is simply not true. Over the short term, market psychology surrounding concept stocks like AOL can dramatically alter the perceived value. Stock splits add to this psychology, and can cause the short term to last months/years. But in the end of the day, stock certificates in AOL represent earnings, rather than lottery tickets. And despite the cheerleading of the analysts, those earnings are highly questionable. Given the recent SEC ruling against propping up future earnings through inflated goodwill charges, those earnings have become even more suspect. Buffet's companies grow to $60,000 per share because of earnings gains. Not because of manipulation. He manages for the long term interest of his shareholders. Steve Case/Bob Pittman manage for the short term interests of themselves, enabling them to take hundreds of millions of dollars from unsuspecting investors. It is a dangerous game indeed, and will most likely end in a large shareholder lawsuit. Mark my words. Regards, JC