EarthLink up on subscriber growth
EarthLink stock hits a new high, after the ISP's subscriber growth beat expectations.
The stock gained about 14 percent to reach 67-7/16, up 8-5/8 from yesterday's close of 59-1/8. The stock has appreciated nearly 170 percent since January 1.
Everen Securities analyst Frederick Moran today reiterated his "buy" rating following the company's report that its subscriber base was growing faster than expected.
EarthLink competitors, like WebTV and AT&T (T), increased their rates this week. WebTV raised the cost of its WebTV Plus Network service from $19.95 per month to $24.95 per month, effective as of June. AT&T's WorldNet revised its formerly unlimited service to charge flat-rate customers additional fees if they stay online more than 150 hours per month.
EarthLink's basic unlimited access remains priced at $19.95, and some analysts have said the other rate hikes,
while good for the revenue of EarthLink's competitors, could have benefits for EarthLink as well, as customers look for less expensive alternatives.
The company said yesterday that it added 80,000 new subscribers in the first quarter, beating Moran's estimate of 65,000. The subscriber base now stands at over 500,000, up 80 percent from 279,000 subscribers counted for the same period a year ago.
Strong revenue for the quarter should follow the company's 500,000-strong subscriber base, said Moran. The 500,000 milestone beat EarthLink's internal estimates. The company originally estimated that it would pass the 500,000-subscriber mark in Q2, said Kirsten Kappos, a company spokeswoman.
When EarthLink's deal with Sprint (FON)--under which Sprint will take a 30 percent stake in EarthLink as the two companies form a joint venture--closes later this quarter, another 130,000 subscribers will be added. Moran said that, as a result, "EarthLink is now positioned to become the No. 2 Internet service provider behind AOL (AOL)." AOL has more than 11 million customers.
In February, EarthLink said its fourth-quarter revenues increased 95 percent, to $24 million, compared with $12.3 million reported in the fourth quarter of 1996. EarthLink's fourth-quarter net losses were $6.6 million, or 59 cents a share, compared with the same quarter a year earlier, when losses came in at $9.3 million, or $1.17 per share.
In the fourth quarter, EarthLink began to focus on deriving additional revenue from advertising, commerce, and other marketing activities targeted to its active member base. As a result, EarthLink posted $270,000 in incremental revenues for that quarter.
AT&T's WorldNet service has more than 1 million customers, the company said.