AOL's unstoppable stock
Neither Microsoft Network, nor disgruntled customers, nor a 10 percent price hike can stop the America Online freight train.
Shares in AOL surged to a 52-week high today, buoyed by pricing moves at AT&T (T) and Web TV, as well as bullish remarks by a Wall Street analyst.
The company's shares surged 2-7/16, to 75-3/8, in mid-morning trading, before retreating slightly to close at 74-1/4. AOL previously has traded as high as 69-7/8 and as low as 20-5/8 during the past 52 weeks. This year alone, AOL stock has surged more than 60 percent--a hefty gain, but less than many other Internet stocks.
The run-up in AOL has surprised many analysts. It also has prompted some AOL insiders to pare back their holdings, but most of them still hold sizable stakes.
Nevertheless, many investors keep buying AOL, which they see as the first blue chip Net company and as a sign of the medium's potential, according to some analysts. The company's stated goal: to become a Net media giant. AOL's market capitalization already stands at $15.3 billion, compared with $8.6 billion for Tribune Company (TRB), $4.4 billion for Knight-Ridder "="" rel="noopener nofollow" class="c-regularLink" target="_blank">Times Mirror (TMC).
The stock was rated a "buy" in new coverage by Bear Stearns, and Prudential reiterated its "buy" rating on the shares.
BancAmerica Robertson Stephenson analyst Keith Benjamin, a longtime AOL bull, yesterday changed his recommendation on the stock from "buy" to "strong buy," a rating was added to the firm's existing stock recommendation system.
Analysts and investors alike are watching closely to see what kind of reaction AOL's competitors will have to the company's decision--effective as of this month--to raise its monthly fees by 10 percent, to $21.95. Most of them are holding at the $19.95-per-month rate, or are dropping prices. But in a surprise move, Microsoft-owned WebTV said yesterday that it would raise the rate for the WebTV Plus Network from $19.95 per month to $24.95 per month.
In addition, AT&T's WorldNet will change the service for its $19.95 monthly rate from unlimited access to a limit of 150 hours, beyond which users will pay extra. The company's decision follows price caps implemented by IBM, among others.