Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Dennis J Baltz who wrote (11582)	4/19/1999 7:16:00 PM
From: larry	Respond to of 41369

The trouble is, I, or we, have used a bunch of models to valuate AOL, and everytime the answer is the same. The best I can get is to use discount of future cash flow and we get a fair value for AOL at 65-70. PEG is cool, because that will make all AOL longs a bit more happy since we can forget the annoying high trailing PE. So let's use the forward earnings and AOL will spot a PE of 250+. Earnings is expected to grow 50% next year and that will give AOL a forward PEG of 5, which is pretty lofty IMHO. Unless you use PRG, but no one is really using PRG. I guess that people are looking for both top and bottom line growth. Admittedly, AOL is a dominant player in the sector that suppose to grow fastest in the years to come and that should give AOL a premium over other net issues. However, it is indeed true that no company with a market cap over 100 billion has ever been traded at trailing PE of over 600. Not long ago, DELL was growing earning and revenue at triple digit yearly, and the issue never reached triple digit trailing PE at that time. Not even close to half of that value. Does that mean that DELL was vastly undervalued at that time? Also, using the PEG issue spots a very big problem. It will mean that when AOL shows any signs of slowing revenue and earning growth, its stock price will get hammered and probably cut to a fraction within days. And the ridiculous thing is at that time, the issue will still grow faster than 90% of the companies on the earth. I do admit that I made a huge mistake of playing momentum on AOL when it was clear that the momentum with AOL is horrible. Have no one else to blame but myself. good luck, larry!