AOL's (AOL) Solid Q4 Results Could Suggest a Turnaround, But Sentiment Still Bearish

AOL, Inc. (NYSE: AOL) shares are trading up 2.5% to $25.27 after the company released their fourth quarter earnings before the market opened today. The results happened to be AOL's first earnings report as an independent company in over a decade.

Responding to the results, Barron's put out an article arguing that AOL isn't getting enough credit from the Street and instead is being valued (at about 3x 2010 EBITDA) in the same group with once dial-up bretheren EarthLink (NASDAQ: ELNK) and United Online (NASDAQ: UNTD). Cited in the Barron's article, a Miller Tabak analyst said, "Right now, it's only getting valued like the dial-up access peers, and it's getting no valuation credit for the content and advertising side of business."

In contrast to the 20-40x multiples of Google (Nasdaq: GOOG), Yahoo! (NASDAQ: YHOO), and InterActiveCorp (NASDAQ: IACI) -- each a company that AOL certainly aspires to be -- AOL's stock trades at just 15x FY10 EPS expectations.

Possibly playing to the hope that AOL could someday be classified with the above market-movers, CEO Tim Armstrong restated the company's objectives for growth on its conference call: "Distribution on the Web has grown faster than relevant content, and we believe that matching technology with content can capture large audiences. In advertising, we want to be the company that helps transition brand advertising to the Web. Consumers have moved to the Web faster than brands have, and we plan on offering compelling content and technology to help them make that transition."

With $147 million in cash and a debt-free balance sheet, Barron's feels that AOL has the wherewithal to carry-out this strategy. As a side-note, Armstrong came over from Google, where he served as President of The Americas Operations, overseeing Google’s North American and Latin American advertising sales, marketing and operations teams.

Could AOL be ready for a John Travolta-like comeback?

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