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

To: Tunica Albuginea who wrote (3184)	1/23/1999 11:19:00 PM
From: RocketMan	Respond to of 41369

I believe this was posted before, but as a reminder here is Cohen's $195 target for AOL, along with his discussion and his reasoning, based on discounted cash flow analysis. Note he also says "we believe there could be very real upside to our current estimates." ML: AMERICA ONLINE:Raising Price Target to $195 Merrill Lynch (J.Cohen (Jon) (1) 212 449-0773) AMERICA ONLINE INC (AOL/NYSE) Raising Price Target to $195 Jonathan Cohen (Jon) (1) 212 449-0773 11 January 1999 ..... Investment Highlights: o We are this morning reiterating our Buy/Buy rating on America Online shares. o America Online's operating prospects continue to look exceptionally strong, and we believe there could be very real upside to our current estimates. Fundamental Highlights: o The company has attained an operating scale and a maturity of its business model that is unique across the consumer Internet space. o We expect America Online to report its December quarter operating results on January 27th. We believe that the company will likely exceed our current earnings estimate of $0.14 per share. We also expect that America Online will have exceeded the 17.0 million member mark by that time. o AOL shares remain our strongest recommendation across the Internet space, and we continue to recommend purchase at current levels. We are this morning reiterating our Buy/Buy rating on America Online shares. At the same time we have increased our near-to-intermediate term price target for the company's stock to $195 per share. Our new price target is based on the application of a multiple of 22.5x our estimate of the company's calendarized 1999 revenues of $4.45 billion dollars (the company's fiscal year ends in June). That multiple is intended to reflect the results of a traditional DCF analysis, and is consistent with our revised long-term operating margin assumption for AOL of 20% (our previous estimate had stood at 15%). America Online's operating prospects continue to look exceptionally strong, and we believe there could be very real upside to our current estimates. We are specifically focused on the company's average online revenue per subscriber figure. We note that our current estimate stands at $4.14 per month per subscriber for calendar 1999, and $4.15 per month per subscriber for calendar 2000. In fact, with the benefit of both the ICQ and Netscape deals, we believe that the figure for 2000 could be substantially an excess of $5.00. America Online is the leading worldwide provider of Internet/online services. Over the past several years, AOL has both contributed to and benefited from the increased popularity of Internet communication, and has emerged as the mass market provider of choice for online service.