AOL (NYSE: AOL) reported earnings Tuesday that flabbergasted investors. It included a loss for the quarter and a reduced earnings forecast for the year that sent its stock to record lows. Investors are concerned that the company, spun off from Time Warner in 2009, won't be able to rebound from years of malaise.
The company, which has heavily invested in professionally produced online video to help it fuel growth, saw shares drop 29 percent in trading before closing at $11.19, a loss of $3.88 per share, or 25.75 percent. The decline left the company with a market cap of $1.2 billion, less, the San Francisco Chronicle points out, than Pandora, which went public just months ago.
"The turnaround still remains questionable," Clayton Moran, an analyst with Benchmark Co. told Bloomberg. "Investors really have to wait longer to see if there's anything concrete that would signal this company can be successful."
AOL reported ad revenue for the quarter increased 14 percent, missing analyst forecasts of 16 percent, and said it lost $11.8 million, or 11 cents a share, down from $1.06 billion and $10.02 a share last year.
The biggest blow came when the company decreased its operating income forecast for the year from $370 million to $340 million. Citi Investment analysts had projected $438 million for the year. The company also said its subscriber losses continued in the quarter; subscription sales declined 23 percent.
On a positive note, AOL said consumers are spending two-and-a-half times longer watching video than a year ago.
"We grew viewers and views by over 100 percent year-over-year," CEO Tim Armstrong said during the company's earnings call."
AOL made numerous content deals in the first half of the year which, Armstrong said, have begun to pay off in views.
"Traffic has grown nicely across the video properties and network. We've done a nice job of getting scalable technology behind those, but we have not fully matched the scale on a consumer side with a revenue potential," he said. "The revenue in the video marketplace is very hard right now, and we can do a better job capturing that going forward. There's a number of straightforward operational items that we need to work on video and we're currently working on them on the revenue side."
For more:
- see this release
- see this Seeking Alpha earnings call transcript
- see this Bloomberg report
Related articles:
AOL losses continue, but there is a silver lining in video - maybe
AOL - Quarterly Breakdown Of Advertising Revenue
AOL may offer some premium video on a subscription basis
Evolving OTT delivery launching an online video revolution