AOL Initiated with an Equal Weight Rating at Barclays

Posted Dec 22nd 2009 11:00AM by Mark Fightmaster
Filed under: Analyst Initiations, AOL (AOL)

Early Tuesday morning, Barclays initiated coverage on AOL (AOL) with a rating of equal weight and a price target of $30. Barclays noted that AOL's "[current] valuation appears attractive." AOL is the parent of BloggingStocks.

Still, Barclays also cautioned that AOL faces "structural challenges related to the declining access business and use metrics, and its strategy of differentiation through content creation and more vertical sites will be difficult in an increasingly competitive online advertising space."

The cautionary note from Barclays reflects the general view on AOL on the Street. Analyst ratings on AOL since Time Warner (TWX) spun it off have tended to lean to the neutral-to-pessimistic side. Five of the eight analysts tracking AOL have issued a neutral (or equivalent) or worse ranking. Given the company's history, the tentative nature of the analysts is understandable.

Technically, it is a bit too early to determine where the shares will run into resistance. It appears that $25 fill that role when the stock begins to rally. Furthermore, there is resistance in place in the form of AOL's 10-day moving average. The good news is that this newly established trendline may not provide too much in the way of resistance when (and if) it is tested.

Skepticism is understandable in this situation, but it is far too early to even guess at which camp (bears or bulls) is right when it comes to AOL.

Tags: AOL, Barclays, inthenews, ipo