AOL Stock Downgraded by Analysts

NEW YORK (TheStreet) -- AOL (AOL) stock was downgraded to "hold" from "buy," and its price target lowered to $50 from $67 by analysts at Jefferies today.

The downgrade follows the FTC's clearance of Verizon (VZ)'s purchase of AOL, according to the firm.

In May, Verizon agreed to buy AOL for $4.4 billion.

After the deal closes, the mass media corporation will be merged into Verizon and operated as a subsidiary. AOL CEO Tim Armstrong and the senior management team are expected to stay on to run AOL, analysts said.

On Tuesday, AOL shares closed up .01% to $50.01.

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 revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, reasonable valuation levels and good cash flow from operations. We feel its 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:

  • AOL's revenue growth has slightly outpaced the industry average of 5.7%. Since the same quarter one year prior, revenues slightly increased by 7.2%. 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 0.19 is very low, it is currently higher than that of the industry average. To add to this, AOL has a quick ratio of 2.00, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Compared to its closing price of one year ago, AOL's share price has jumped by 37.12%, exceeding the performance of the broader market during that same time frame. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • Net operating cash flow has significantly increased by 137.02% to $55.70 million when compared to the same quarter last year. In addition, AOL INC has also vastly surpassed the industry average cash flow growth rate of 41.25%.
  • You can view the full analysis from the report here: AOL Ratings Report

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