AOL Is "Severely Undervalued" Relative To LinkedIn And Pandora, Says Armstrong

tim armstrong, pointing, GIF

LinkedIn is worth $7 billion or so.  Pandora’s market cap is $2.25 billion.

AOL, meanwhile, is worth $2 billion.

AOL CEO Tim Armstrong thinks that’s nuts. According to the WSJ, he told investors last week that AOL is  “severely undervalued” compared to those two companies, which just went through IPOs.

“I believe if we had taken everything we showed you today separately and trotted it down a few blocks from here to Wall Street and showed them what we’ve seen, I think the valuation of this company would be dramatically different.”

Right now, investors base almost all of AOL’s valuation off its steadily declining, but still revenue rich subscription business. There’s some sense to this: as of January, 80% of the company’s profits still came from its subscription business.

What AOL has to do to be a more valuable company is take all the money it’s making from the ISP business and invest it in something new and very fast growing. Something full of promise, like LinkedIn or Pandora’s businesses.

So far, there are two businesses in AOL’s investment portfolio: Patch and Huffington Post.

Patch is the one that probably has Wall Street most sceptical. Probably because its a huge waste of money that even insiders don’t believe in.

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