Morgan Stanley upgraded AOL Time Warner (AOL ) to overweight from equal-weight.
Analyst Richard Bilotti says the balance sheet risk is reduced by the number of asset sale alternatives and internally generated free-cash flow. He notes AOL's potential for negative earnings per share revisions in 2003 is now reduced.
Bilotti says AOL's valuation, using sum-of-the-parts discounted, consolidated price/free-cash flow methodologies, points to a $17 intrinsic value, which is his price target. He sees 40 cents 2003 earnings per share, 52 cents for 2004, and 65 cents for 2005.