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  • technosemd technosemd • Nov 12, 2012 8:44 PM Flag

    AOL - a shrinking universe

    AOL – a shrinking universe that even Tim Armstrong cannot stop.
    As a short, I have been frustrated but intrigued by AOL’s continued strength in 2012. But it is now crystal clear that her days are truly numbered. Here’s why –
    Search: What do people use? Google and sometimes Yahoo & Microsoft - the current gateways to internet sites and future advertising revenue. For video, its YouTube.
    Email: Nobody these days gets an AOL email address. It’s as hip as your grandmother. People seeking a new email address get a Gmail account or one affiliated with their employer.
    Content: By 2015 all that will be left is the Huffington Post. It is the only truly strong content provider in the AOL universe. The rest are 3rd rate at best. Even TechCruch is growing weaker. Patch is pathetic. Period.
    If I were long, I’d take my profits off the table and be grateful. This stock will plummet hard and fast on December 6, after the shareholder of record date. People greedy for the dividend will unfortunately get slaughtered.
    Good luck to one and all. Just calling it, like I see it.

    Sentiment: Sell

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    • drugsman12 drugsman12 • Nov 12, 2012 11:07 PM Flag

      I thought the same. But we are wrong. Not sure how they doing it, but they are growing revenue. The earnings reported is misleading and really they are much higher. They have about 45 million a quarter in non cash depreciation and amortization of intangibles, that when you add back these guys are doing like over 300 million/year in free cash flow and this is projected to grow next year. When you consider that after all the buybacks are completed, there will only be 72 million shares, and after the $5 special dividend, this is really only trading at $33 right now adjusted for that. So the true market cap is only $33 times 72 million or about 2.4 billion. So this is only trading at 8 times free cash flow. That is very cheap for an interenet stock. So as crazy as it seems, this stock really is worth the current price, and could even trade much much higher even.

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