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

To: robert duke who wrote (11528)	10/24/1998 1:47:00 PM
From: Steve Robinett	Read Replies (1) \| Respond to of 13594

Robert, Re: Split A 3:1 is certainly possible and it would not leave AOL without shares for other purposes (employee options, convertible debt issues, etc..). 3:1 would also drop the price down to about $40/shr. Re: Earnings You suggest $1.83/shr earnings over the next year with an $275/shr price. Consensus for this Tuesday's quarterly earnings is about $.23/share with a whisper number at $.25-$.26/share. That would mean earnings would have to grow at a rate higher than 80% over the next year to get to your $1.83. Where does that come from? 80% more subscribers, i.e., 22 million? Massively increased e-commerce revenues? E-commerce is well below 20% of AOL's total revenues. It would have to explode to push up earnings that significantly. Reduced costs? AOL recently started trying to fill every mailbox in America with disks--not cheap. Also the SEC has forced AOL into a little more orthodox accounting. Less room to fiddle. The max I can see over the next year is $1.20. The further we try to look into the future, the less earnings visibility we've actually got, especially with a company like AOL. Still, IMO, revenue growth (anticipating future earnings growth), is what keeps AOL's price rising and keeps people building every higher castles in the sky. A brand-name Internet stock that actually has earnings is rare. If revenue growth slows, even with rising earnings, I would not be surprised to see AOL tank. Re: Tuesday's earnings and share price. As for Tuesday's earnings report and its impact on the share price, I would guess good news, perhaps even a bit above the whisper number and AOL moving up to, say, $122-3/16 (I try to be specific). On bad news, it tanks to somewhere around $100, say 103-1/16. Best, --Steve