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Bear of the Day: AOL


There are times when I look at the list of Zacks Rank #5 (Strong Sell) stocks and I see a theme. Right now the theme is oil stocks and anything related to the oil patch, as those stocks are seeing lowered earnings estimates as the price of crude continues to fall. But a different name stood out at me on the list of roughly 200 #5’s.

AOL (NYSE: AOL) is now a Zacks Rank #5 (Strong Sell) while I see a number of other internet names that have much higher Zacks Rank. This is clearly not a case of a sector in turmoil, but rather a stock that is seeing analysts cut earnings estimates.

Company Description

AOL, formerly America Online, is an online media company that provides internet search and content as well as ad serving technology. The company was founded in 1985 and is headquartered in New York, New York.

A Few Recent Misses

AOL has missed the Zacks Consensus Estimate in two of the last three quarters, which is a departure from the recent history of beating the number. Prior to the recent misses AOL was on a roll of 9 consecutive beats of the Zacks Consensus Estimate.

Tax Loss Selling

At the end of the year, I take a look at stocks that could see a pile-on effect of tax loss selling and lowered earnings estimates. This is not the case for AOL as the stock is more or less flat with the start of the year, so there is no real benefit to any tax loss selling. In fact, it is almost the opposite.

Chart

The price and consensus chart for AOL has a strange phenomenon. There is a jolt higher by the 2012 consensus line – which is likely the result of selling the IP to Microsoft. Since that time earnings have not really done much. Lately, we are seeing estimates slide and that is the reason AOL has dropped to a Zacks Rank #5 (Strong Sell)

 

 

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