Is AOL Stock Supported By These Factors?

With shares of AOL (NYSE:AOL) trading around $36, is AOL an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

AOL is a global Web services company with a range of brands and offerings that intrigue a global audience. The company’s business spans online content, products and services which it offers to consumers, publishers and advertisers. Its business operations are focused on AOL Properties and Third Party Network. It offers a range of display advertising, including text and banner advertising, mobile, video and rich media advertising, sponsorship of content offerings, and local and classified advertising. Through its broad network, AOL is able to offer content to a large user base.

AOL posted earnings and revenue figures that beat Wall Street’s expectations. The revenue beat is a great sign to investors who seek high growth out of the company. The AOL brand lost its spark several years ago but with recent restructuring, it is picking up steam once again. As an increasing number of consumers look for entertainment and information online, companies like AOL stand to see rising profits.

T = Technicals on the Stock Chart are Mixed

AOL stock has been surging higher in recent times. However, the stock has been trading sideways over the last several months as it continues to digest the recent move. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, AOL is trading between its key averages which signal neutral price action in the near-term.


(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of AOL options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

AOL Options




What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options



September Options



As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on AOL’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for AOL look like and more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)





Revenue Growth (Y-O-Y)





Earnings Reaction





AOL has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been optimistic about AOL’s recent earnings announcements.

* As of this writing

P = Average Relative Performance Versus Peers and Sector

How has AOL stock done relative to its peers, Google (NASDAQ:GOOG), Yahoo! (NASDAQ:YHOO), Microsoft (NASDAQ:MSFT), and sector?






Year-to-Date Return






AOL has been an average relative performer, year-to-date.


AOL provides informational content and entertainment to a growing user base around the world. A recent earnings announcement has shareholders happy with the company. The stock is now trading sideways as it digests gains from a recent explosive move higher. Over the last four quarters, investors in the company have been optimistic as earnings and revenue figures have been rising. Relative to its peers and sector, AOL has been an average year-to-date performer. WAIT AND SEE what AOL does this coming quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.