AOL Gets an Upgrade - TheStreet

AOL Gets an Upgrade

Merrill analysts raise the shares to buy from neutral, with a $24 price target.
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Merrill Lynch upgraded

AOL Time Warner

(AOL)

stock on Thursday, citing cost-cutting at the media giant.

A group of Merrill analysts upped the shares to buy from neutral, with a $24 price target. They also cut the company's full-year 2003 revenue growth estimate to 5% from 6%, but raised forecasts for its 2003 earnings before interest, taxes, depreciation and amortization to 5% from 4%.

For 2004, Merrill expects higher revenue and EBITDA growth, at 6% and 11%, respectively.

"The company has made impressive strides on a number of levels ... which, combined with modest operating improvement and cost cuts at the AOL division, may position the company to formally raise guidance following second-quarter results," the note said. AOL reports its earnings on July 23.

The group said that with Chief Executive Don Logan at the helm of AOL, its balance sheet has strengthened, the company's cost structure has been "right-sized" and there has been a renewed focus on advertising.

The report also cited a few risks that AOL faces, such as ongoing investigations by the

Securities and Exchange Commission

and the Department of Justice, as well as shareholder lawsuits. The firm also said AOL could suffer if it fails to complete the IPO of its cable assets or to develop a broadband strategy.

Shares of AOL were up 23 cents, or 1.4%, at $16.59 Thursday morning.