NEW YORK (TheStreet) -- AOL (AOL) shares are up 0.95% to $44.78 on Tuesday after analysts at Nomura raised their price target to $48 from $43 while maintaining its "neutral" rating on the company's shares.
The updated rating comes a day after AOL held its second annual "programmatic upfront" event at which it detailed its efforts to move to the forefront of both online and offline advertising.
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TheStreet Ratings team rates AOL INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate AOL INC (AOL) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth significantly trails the industry average of 43.6%. Since the same quarter one year prior, revenues rose by 12.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Although AOL's debt-to-equity ratio of 0.10 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.03, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has increased to $125.90 million or 40.82% when compared to the same quarter last year. Despite an increase in cash flow, AOL INC's average is still marginally south of the industry average growth rate of 41.40%.
- AOL INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, AOL INC reported lower earnings of $1.12 versus $11.02 in the prior year. This year, the market expects an improvement in earnings ($2.06 versus $1.12).
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: AOL Ratings Report