With its courtroom woes behind it, America Online Inc’s shares, which closed at $38 yesterday, may reach $55 to $60 by late fall, according to analyst Morgan Stanley Inc, which recently upgraded its shares from outperform to strong buy. Yesterday, the online service provider said it had preliminary approval to settle 11 class-action lawsuits which alleged AOL overcharged customers and didn’t disclose its billing and cancellation procedures properly. Bad news surrounded the company last month, when the Federal Trade Commission began poking into its billing practices, its competitors began sprinting the Web and its COO and president jumped ship after only four months on the job (CI No 2,942). But yesterday AOL vowed to improve communication with users and give free time to affected customers. Morgan Stanley said although AOL’s shares have been falling like a knife it will soon shake off recent turmoil and shrugged off reports that the Web will crush proprietary services as exaggerated and overdone. Also, earnings per share estimates throughout the stock decline have remained unchanged at $1.05 for fiscal 1997 and $0.54 for fiscal 1996. More than 800,000 of AOL’s 6m subscribers have upgraded to AOL 3.0, the analyst noted, and it expects bundling with Microsoft Windows 95 to increase use and cut subscriber acquisition costs.
