Despite a recent lowering of the earnings estimate consensus for America Online
, the online giant's shares today hit a new high.
AOL shares once again busted through the 100-a-share range, closing at 100-3/4, up 1 point over yesterday, marking a historic share price close for AOL, which saw its shares trading in the mid-30s range only a year ago.
Analysts expect the online giant to post profits on February 10, when it releases its second-quarter
earnings, and predict that the company will report net profits of 16 cents a share. That estimate is down slightly from two weeks ago, when analysts had pegged the company's profits at 17 cents a share, according to First Call.
Nonetheless, analysts remain optimistic about the company's prospects and some consider the company's valuation to be in line with other Internet companies. Based on AOL's projected financial performance for fiscal 1999, the company carries a valuation of 50 times its price-to-earnings multiple, or PE ratio.
"Over the last year, we have gotten more and more visibility on AOL's earnings potential," said Keith Benjamin, an analyst with BancAmerica Robertson Stephens.
With this greater visibility, the company appears likely to boost its subscriber base, revenues, and earnings 50 percent by the time 1999 rolls around. Hence, Benjamin said, a valuation of 50 times its PE ratio is not out of line.
The Internet sector overall also is expected to see its average share price double in 1998, he noted, building on the momentum the sector has gained over the last year, during which time Yahoo (YHOO) saw a 500 percent increase in price, Lycos (LCOS) shares quadrupled and Excite's(XCIT) stock gained threefold.
Benjamin noted that AOL's investor mix also changed over the past
six months. Institutional investors, such as those buying into pension funds or mutual
funds, once represented upwards of 66 percent of AOL's investors. That number has dropped to less than 40 percent, with individual investors now making up the bulk of AOL shareholders.
"That was because the majority of investors didn't know what to make of AOL," Benjamin said. "But now the company has gotten to where more investors understand it...and there is better visibility [on its financial foundation]."