Why AOL Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of online media group AOL (NYSE: AOL  ) sank 10% today after the company's quarterly results missed Wall Street expectations.

So what: AOL shares have soared over the past year on strong ad revenue growth, but today's first-quarter profit miss -- adjusted EPS of $0.41 versus the consensus of $0.44 -- reignites concerns over its shrinking dial-up business. While ad revenue for the quarter grew a solid 9%, the increase was mainly offset by a 9% drop in subscription revenue, suggesting that the company is still not out of the woods.

Now what: While AOL isn't progressing as quickly as Wall Street would like, its fundamentals are at least trending in the right direction. "Growth continues at AOL," said Chairman and CEO Tim Armstrong. "AOL's strategy of being the first scaled media and technology company is clearly represented in our results today, and we will continue to aggressively drive the company toward near-and long-term growth." More important, with the stock now off about 15% from its 52-week highs, Mr. Market might finally be offering a decent window to buy into those prospects.

Interested in more info AOL? Add it to your watchlist.

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