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Axiom downgraded AOL, Inc. (NYSE: AOL) Tuesday from Buy to Hold following news of its acquisition by Verizon Communications Inc. (NYSE: VZ). No price target was assigned.
Analyst Victor Anthony noted that the deal was at a 17 percent premium to Monday’s closing price and that reports have surfaced that Huffington Post could be spun-off.
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Anthony added that “rumors of an acquisition by Verizon had been floated for months,” and the news did not come as a surprise.
“AOL brings to Verizon a fully integrated programmatic platform across all screens including linear TV, to aid the launch of its OTT video platform, a few strong web properties, a few hidden assets like MapQuest, and strong cash flow,” according to the analyst note, while “Huffington Post and TechCrunch are highly trafficked web properties that could be leveraged up with video.”
Anthony felt it unlikely that other companies would step in with a bid.
Yahoo! Inc. (NASDAQ: YHOO) “won’t step in with a counter bid, in our opinion, given the spin-off” of its shares in Alibaba Group Holding Ltd (NYSE: BABA).
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AT&T Inc. (NYSE: T) was “busy with the acquisition” of DIRECTV (NASDAQ: DTV) while Anthony saw “no strategic rationale” for Google Inc (NASDAQ: GOOG) (NASDAQ: GOOGL), Facebook Inc (NASDAQ: FB), or Alibaba “to step in with rival bids.”
As for the valuation, Anthony said that Verizon was paying 1.5x 2016 sales and 8.0x 2016 EBITDA, which were a fair multiples compared to peers.
Anthony concluded by highlighting four points about the deal:
1. “The combination of Verizon and AOL brings to AOL the scale of Facebook and Google: Verizon touches 70% of Internet traffic across 1.5 billion PCs, TVs, and mobile devices.”
2. “The combination of Verizon and AOL creates a dominant force in mobile, video, social, and programmatic platforms.”
3. “Verizon leads in mobile & mobile video, and AOL leads in video & programmatic advertising. The combination creates the first & most powerful media technology company on the planet.”
4. “The bundling of Verizon and AOL creates a powerful platform for the unbundling of media.”
AOL closed at $50.52, up 18.62 percent.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.