AOL 's good report card from Bloomberg; shares outpace Big 3
America Online (Remember them?) is on a roll in the stock market . After adding more than 4 percent last week, AOL’s shares have almost tripled in the past 12 months, eclipsing the performance of Apple, Google, and Microsoft.
AOL: a positive report
"The stock hasn’t seen that kind of gain since the dot-com boom in 1998, three years before AOL merged with Time Warner," says Bloomberg admiringly today.
AOL's biggest boost came from a deal on April 9 , selling patents to Microsoft for $1.1 billion.
But the stock is still motoring. It has climbed 39 percent more since then. That signals, says Bloomberg, that investors have growing faith in CEO Tim Armstrong’s plan to turn AOL into an advertising-driven Web portal and news publisher.
“AOL is in the early innings of our strategy,” Armstrong, a former ad executive at Google, said in an interview. “Our team is working hard to rebuild America’s first Internet company and the brand that took the world online. We have a lot more to do, and we’re doing it.”
The shares gained 188 percent in the past 12 months before today. Apple was up 72 percent in that time, Google increased 44 percent, and Microsoft’s gain is 12 percent. AOL was $36.10 at today in New York.
AOL, based in New York, was once the biggest Internet provider in the U.S. with many customers in the UK too . Then the shift from dial-up to broadband hit its revenues.
The $124 billion Time Warner-AOL merger in 2001, meant to create a new-media powerhouse, instead, brought record losses, declining sales and shareholder lawsuits.
When AOL was spun off from Time Warner in 2009, Armstrong's challenge was to rebuild a company with slumping sales and erratic profits.
He has invested more than $600 million in content, buying the Huffington Post last year for $315 million and spending $300 million to develop Patch, an online local newspaper, with multiple editions.
Armstrong says Patch should bring in about $50 million in sales this year- and may be profitable by the second half of next year.
AOL revenue is projected by analysts to be little changed next year, however. But the patent sale will boost profit in 2012 by about $1 billion.
Bloomberg says AOL is a relative bargain compared with other Internet companies. Its shares are trading at 8.6 percent times the company’s profit for the past four quarters. Yahoo!, also trying to rebuild , trades at 16.9 times profit.
AOL is still holding on to its shrinking dial-up business, offering dial-up subscribers additional services. AOL also continues to invest in the Huffington Post, adding a live, online video news channel, and AOL’s TechCrunch and Engadget blogs. There are expansion plans outside the U.S.
Ronald Josey, a New York- based analyst at ThinkEquity, told Bloomberg the company could see revenue growth in the coming year. “AOL is further along in their turnaround than Yahoo is,” he said.
AOL has cut costs 14 percent in in the first six months of this year, compared with the same period a year earlier.
Anthony DiClemente, an analyst with Barclays in New York gave his verdict, “They’re definitely better off than they were a year ago,” he said. “They’re more of a real company now.”