Aol’s New Model: Fighting The Downward Trend

AOL may be brushing up its brand image in preparation for its spin-off IPO in December, but brushing up its underlying business will take a little longer. Barclays analyst Douglas Anmuth released a report on AOL today complete with an earnings and revenue model going out to 2014 (see below). He projects absolutely no growth in revenues over the next five years, and only a one-time bump in profits in 2011, due to cutting one third of its current labor costs , before declines set in again. In other words, investors who buy AOL stock will do so because it is a cost-cutting and turnaround story not a growth story, and that will determine what kinds of investors will buy the stock. Anmuth outlines some of the key factors which investors should be paying attention to.