AOL tears higher after positive ad earnings

My AOL.

AOL went on a tear on Tuesday after reporting higher-than-expected revenue and profit and posting a revenue number that didn't decline - the first time that has happened in seven years. Keeping with the seven year theme, the company’s overall ad business posted the strongest advertising growth the company has seen in seven years.

Who would have thought, if you bet on AOL at the beginning of the year, you ended up picking one of the hottest tech stocks this year. Shares are up 189% year-to-date! AOL said on Tuesday that Q3 revenue was flat at $531.7 million, ahead of analysts' average estimate of $521.6 million.

The less bullish news: The company's key domestic display number slipped 3% and overall display sales were down 1%. However advertising revenue rose 7% to $340 million, while subscription revenue for AOL's dial-up services fell 10% to $173.5 million.

At first glance that appears negative, however if you drill in deeper, Q3 subscription revenue had its lowest rate of decline in six years. "Things look great," a Wall Street analyst said. "This company is continuing to make steps in the right direction."

These trends are helping AOL since its turnaround hinges on the success of getting more online advertising dollars and reducing its reliance on the lucrative but moribund dial-up business. AOL Chief Executive Tim Armstrong said in an interview with Reuters that the main focus next year will be to focus on advertising and video, which tends to command higher prices from marketers.

AOL (AOL : NYSE : US$43.70), Net Change: 7.89, % Change: 22.03%, Volume: 10,038,833

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Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

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