Why AOL Inc. Shares Fell Today

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 AOL  (NYSE: AOL  ) have lost about a quarter of their value today after the onetime pioneering ISP reported weak earnings for its fiscal first quarter this morning.

So what: AOL's quarterly revenue climbed 8% year over year to $583.3 million, but the company's adjusted earnings of $0.34 per share were far from its GAAP earnings of only $0.11, which was two thirds lower than the year-ago quarter's result due to various restructuring charges and other one-time costs. Analysts had been expecting $578 million in revenue, but $0.45 in EPS, so even AOL's adjusted bottom line was far below what Wall Street had wanted.

AOL's shift toward an ad-based revenue model continues apace, as total ad revenue was up 16% thanks to an increase of 55% in its third-party platform ad revenue. But its online network of sites recorded a 6% year-over-year drop in ad revenue and overall display-ad revenue fell 3% year over year. The company's haphazard spending spree to drive this shift continues as well, as AOL announced the $101 million acquisition of Convertro, an advertising-effectiveness analytics company in its earnings release.

Now what: For all its efforts, AOL continues to draw virtually all of its adjusted operating income from its subscriber base -- of the $107.3 million in adjusted pretax operating income it reported this quarter, more than 100% came from its subscriber segment. But there are now 9% fewer subscribers than there were a year ago. AOL's attempt to become a content portal has yet to prove profitable, and this latest earnings report only confirms the company's ongoing difficulties. I'd stay on the sidelines for this one.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2948062, ~/Articles/ArticleHandler.aspx, 8/20/2014 2:10:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement