Street Reacts: AOL Unlikely to See Alternative Bidder

Yesterday, Verizon Communications Inc. VZ bid $50 per share in cash for AOL, Inc. AOL, causing AOL to close the day at $50.52, up 18.6 percent. Wall Street analysts expect that this deal will close – and that no alternative bidders will emerge to push the price higher. Both Deutsche Bank and Credit Suisse changed their price targets to $50, while Goldman Sachs upped its price target to just $44.

Analysts at Deutsche Bank said that the deal is a "win – win," and that it demonstrated that AOL CEO Tim Armstrong is a "money maker." The analysts said that the potential for other bids is "limited," a sentiment echoed by Credit Suisse that said that there is a "low likelihood of an alternative bidder."

Deutsche Bank also said that the acquisition is a "low-risk transaction" for Verizon that will also offer it "new capabilities." Highlighted in that is strong and stable cash flows and a couple "good assets buried under the hood." In their note, analysts at Axiom said that those buried assets include MapQuest.

Goldman has been flat-footed on AOL thus far this year. Prior to the Verizon bid, the analysts had AOL on its "Americas Sell List," during which the stock increased 27 percent. In yesterday's research note, the analysts removed AOL from the list and upgraded the stock to Neutral. In total, Goldman puts the likelihood of a deal in its top category, but still incorporates the fundamental valuation of $35 into its model. That dragged the $50 price target lower to $44.

Verizon fell 0.4 percent Tuesday on the news, though the price seems to be recovering those losses in premarket trading. The stock has gained more than 6 percent this year, more than tripling the return of the S&P 500. Including yesterday's gain, AOL is up 9.5 percent year-to-date.