Monness, Crespi, Hardt Initiate Coverage On AOL

Monness, Crespi, Hardt & Co. initiated coverage on AOL Inc. AOL Monday with a Buy rating and $67 price target.

Analyst James Cakmak observed that over “the last five years since the spinoff from Time Warner, AOL has uniquely positioned itself to maximize exposure to the fastest growing areas of the Internet, namely programmatic and digital video advertising.”

“We find AOL’s assets and strategy perfectly aligned with broader industry and secular trends, noting: (1) transition of ad buying and delivery from traditional to programmatic facilitating improved targeting and ROI; (2) greater adoption and implementation of premium formats such as digital video; and (3) utilization of fewer and larger ad platforms to drive efficiencies,” according to Cakmak.

Cakmak added, “We view Google [GOOG] and Facebook (Atlas) [FB] as the only two players equipped to benefit from the aforementioned trends...Although we do not expect AOL to overtake Google and Facebook over the long-run, we see the number three slot as fully secure.”

The analyst report concluded by noting that with the stock is trading “at just 6.6x EBITDA, we argue AOL offers one of the most compelling risk-reward tradeoffs in the space.  We look for several turns of multiple expansion as the financial outlook of the growth assets compared to legacy becomes increasingly apparent.  Our target implies about 45 percent upside to the shares.”

AOL Inc. recently traded at $45.68, down 1.04 percent.