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

To: Dr. D who wrote (3943)	1/28/1999 11:59:00 PM
From: Ian Davidson	Read Replies (1) \| Respond to of 41369

Hi Jinx3d, I know...I felt exactly the same way, which is why I was pleasantly suprised (stunned) at his answer. Everyone has been talking about the "bubble", but I don't think he even mentioned the word. Maybe his comments suprised a lot of people. Ian

To: Dr. D who wrote (3943)	1/29/1999 12:08:00 AM
From: Joe E.	Respond to of 41369

OK, for all of you out there who say that fundamental analysis cannot be applied to AOL, here is something to chew on: AOL Revenue track: REVENUE % increase yr/yr-q/q (ex SEP 97 up 77% VS sep 96 and 5% v Jun97) Quarters 1996 1997 1998 1999 1997 1998 1999 SEP 197,902 349,982 521,638 858,000 77-5 49-10 64-8 DEC 249,145 409,412 591,996 960,000 64-17 45-13 62-12 MAR 312,340 450,091 693,640 44-10 54-17 JUN 334,467 475,515 792,726 42-6 67-14 Totals 1,093,854 1,685,000 2,600,000 The compound revenue growth rate 9/96 to 12/99 was 13% per quarter, or 63% per year. Assuming they can keep this up for 9.5 years (just for grins) gives fiscal 2008 revenues of $344 billion. Assuming the same 12.6% after tax margins then as in the latest quarter gives $43 billion in profits in fiscal 1998. Assuming management gets 5% of the company per year in stock options (ouch) gives 892 million presplit equivalent shares in fiscal 1998, providing a per share profit of $48 for fiscal 2008. Assuming a P/E to trailing earnings of 63 (same as the growth rate) gives a share price of $3024 per share at the end of fiscal 2008. Since the stock closed today at $174.44, the annual appreciation implied between now and then is 35%. Or, assuming a discount rate of 20% for this risky stock, the present value of the $3024 stock price is $535. So, therefore the stock is obviously underpriced, and we can anticipate a smart rally to $535. The only tiny problem I can see is coming up with fiscal 2008 revenue of $344 billion. But I will leave imagining how this might happen to you new age investors. Caution: All of the above estimates may be off, as the future is unknowable.