Report Whacks AOL TW Stock

Cable World, Sept 3, 2001 by Mavis Scanlon

Shares of AOL Time Warner, slumping along with other media stocks, were hit especially hard Thursday after Wit Soundview research analyst Jordan Rohan cut his 2001 and 2002 revenue and earnings estimates for the media giant, along with his price target for the company's stock.

Alreadly jittery over the possibility that the company may not meet its 2001 financial targets, investors have driven the stock down more than 36% from its recent high of $56.60, hit in May. AOL took a sharp drop Thursday, falling $2.50, or 6.5%, to $36, on the heels of Soundview's note, but regained $1.53, to trade at $37.53, as of midday Friday.

While Rohan expects the company will meet Wall Street's consensus estimates for the third quarter, the national television advertising picture for the fourth quarter "is proceeding along the worst-case scenario," he wrote in a research note, and that will impact AOL's Networks and Online divisions.

He cut his 2001 estimates for revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) to $38.7 billion and $10.6 billion, respectively, from $39.9 billion and $10.7 billion. While the cuts are small, they are below the targets of $40 billion in revenue and $11 billion in EBITDA that AOL set for itself, and more in line with Wall Street's consensus estimates. Because the advertising picture is unlikely to improve in the first half of 2002, Soundview cut its revenue and EBITDA numbers to $42.6 billion and $13 billion, from $43.5 billion and $13.6 billion, respectively.

Rohan, who had a price target of $60 for the stock, lowered that to $50.