4 Ways AOL Rewards Shareholders This Year (Or Doesn't)

On Wednesday, Jefferies issued a company note on AOL, Inc. AOL after the company posted fourth quarter revenue of $710 million, which fell short of analyst estimates of $721 million, and earnings per share of $0.92 which beat estimates of $0.72.

Currently Jefferies rates AOL as a Buy and lowered its price target from $70 to $67.

Analysts Brian Pitz, Brian Fitzgerald, Sachin Khattar, Timothy O'Shea and Corey Werbelow gave two scenarios in the report showing the upside and downside potential for investing in AOL.

Upside:

1. AOL achieves over double digit organic growth next year from re-acceleration from Platform.

2. Network revenues continue to grow and scale.

3. The company is able to increase APRU for current access customers.

4. 2015 OIBDA: $540M; Target Multiple: 11.0x; Target Price: $74.

Downside:

1. Organic growth on the Advertising platform doesn't achieve industry level growth.

2. Access churn starts to tick up. The rate has consistently decreased from 3 percent during the first quarter of 2010 to 1.3 percent by the end of fourth quarter of 2014.

3. AOL is unable to increasingly diversify away from non-subscriber traffic.

4. 2012 OIBDA: $416M; Target Multiple: 6.0x; Target Price: $31.

AOL is down 0.55 percent on Thursday morning.