AOL Stock Surging Despite Two Notch Downgrade

NEW YORK (TheStreet) -- Shares of AOL (AOL) are surging, up 18.9% to $50.64 on heavy volume in late morning trading Tuesday, despite a ratings cut at by analysts at Cantor Fitzgerald this morning.

The firm downgraded AOL by two notches to "sell" from "buy" after Verizon Communications (VZ) agreed to acquire the company for $50 per share.

Verizon announced plans to buy the Internet services icon in a $4.4 billion deal this morning, the Associated Press reports.

Cantor said the takeover valuation is "relatively fair" and that a higher bidder is unlikely to emerge.

Also, AOL has held advanced talks to spin off its Huffington Post unit which is valued at more than $1 billion, according to Re/code.

About 21.96 million shares of AOL have exchanged hands as of 10:54 a.m. ET today, compared to its average trading volume of about 951,167 shares a day.

New York City-based AOL is a global media and technology company with a suite of digital brands, products and services.

The company is focused on attracting and engaging consumers by creating and offering digital content, products and services and providing advertising services on both its owned and operated properties and third-party websites.

Insight from TheStreet's Research Team:

Chris Versace commented on AOL in a recent post on RealMoney.com. Here is a snippet of what Versace had to say about the stock:

This morning, Verizon (VZ) announced its intention to acquire AOL (AOL) for $4.4 billion, or roughly $50 per share, a 16.5% premium to yesterday's closing price. I suspect there will be all sorts of reasons put forth for the deal, as well as backslapping from AOL CEO Tim Armstrong over how Verizon is a fantastic choice and from Verizon CEO Lowell McAdam over how AOL is a crown jewel that Verizon had to have.

Or at least have now.

Cited reasons for Verizon acquiring AOL include:

  • Acquiring AOL would further its strategy to build out its LTE wireless video and streaming video strategy.
  • AOL would contribute to its Internet of Things platform.

From AOL's perspective, Armstrong cited the need for the company to be part of a larger player. Verizon has 1.5 billion connected devices in the United States and touches 70% of U.S. Internet traffic, according to Armstrong.

- Chris Versace, 'Resist the Urge to Buy on AOL Deal Hype' originally published 5/12/2015 on RealMoney.com.

Want more information like this from Chris Versace BEFORE your stock moves? Learn more about RealMoney.com now.

Separately, 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 solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company shows low profit margins."

You can view the full analysis from the report here: AOL Ratings Report

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