AOL's mixed 2014 fourth quarter results and a muted 2015 outlook are likely to keep a lid on the stock in the short-term, Cantor Fitzgerald said. However, in the long-term, analysts expect AOL's focus on non-commoditized areas, including video and programmatic, will aid in re-accelerating growth and expanding margins in 2016 and on.
AOL reported higher 2014 fourth quarter earnings of 92 cents per share, versus analysts estimates of 81 cents per share, and higher 2014 fiscal year earnings of $2.23 per share versus analysts' estimates of $2.12.
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However, during the fourth quarter, total revenue of $710.3 million fell short of analysts' $723.9 million estimate. Total 2014 fiscal year revenue of $2.52 billion also did not meet Cantor's expectations of $2.54 billion.
Cantor increased its 2015 earnings estimates to $2.78 per share from $2.73 per share, but lowered its 2015 fiscal year revenue estimates to $2.58 billion from $2.75 billion.
AOL is a global Web services company with a range of brands and offerings, and a global audience.
Separately, TheStreet Ratings team rates AOL INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate AOL INC (AOL) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. 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, increase in net income, reasonable valuation levels and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AOL's revenue growth has slightly outpaced the industry average of 9.3%. Since the same quarter one year prior, revenues rose by 11.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Although AOL's debt-to-equity ratio of 0.19 is very low, it is currently higher than that of the industry average. To add to this, AOL has a quick ratio of 1.83, which demonstrates the ability of the company to cover short-term liquidity needs.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Internet Software & Services industry. The net income increased by 1325.0% when compared to the same quarter one year prior, rising from $2.00 million to $28.50 million.
- Net operating cash flow has increased to $137.80 million or 39.33% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 25.06%.
- You can view the full analysis from the report here: AOL Ratings Report