AOL Surges With Upgrades in Tow, But Reasons for Caution Remain

After a few years of dormancy, and despite strong movement on the stock chart, AOL (NYSE:AOL) bulls seem to be limbering up and getting ready to charge. The company posted its first revenue growth in eight years on Friday, and analysts have been quick to weigh in.

Jefferies pushed its price target on the stock up from $44 to $50, a 48.3 percent upside on its February 8 closing price of $33.72. The firm reiterated a “Buy” rating following AOL’s fourth-quarter results, which showed revenue growth for the first time in eight years. Briefly, total 4Q revenues grew 4 percent to $599.6 million, while full-year revenues were flat at $2.2 billion. Diluted EPS for the quarter grew an attractive 78 percent to $0.41.

The results also prompted an upgrade to “Outperform” from “Sector Perform” from analysts at RBC Capital, with a new price target of $45. This compares to the mean analyst price target of $39.77, with a majority of “Hold” ratings.

Combined, the analyst comments helped push the stock up as much as 6.5 percent in morning trading on Monday, punctuating 11.11 percent gains for the previous week. All in all, there are a lot of good reasons to be excited about this company, but every good earnings report comes with a bit of bad news…