AOL, Inc. (NYSE:AOL) posted better than expected gross revenues and OIBDA for the third quarter, which was primarily driven by robust top line results from the company’s Networks segment and Brand Group. UBS analysts (Eric J. Sheridan, Vishal J. Patel and Timothy E. Chiodo) expect the growth momentum to continue driven by AOL Networks, and efforts by management to enhance its Adap.tv platform.

AOL

Strategy working

As more video content is “produced and monetized,” UBS analysts expect Brand Group to also make significant contributions to the top line growth. Analysts note that despite management being busy with investing in key properties abroad, their confidence in the “segment’s prospects” have increased for the fourth quarter. On the search, analysts note that though the revenues have decreased, it is still better than what many expected.

The third quarter results from AOL, Inc. (NYSE:AOL) underline the fact that the strategy of “growth opportunities within programmatic ad networks and premium digital advertising” has in fact paid off. Also, discussion during the earnings call, on both display and search pricing, reflects that the company will be able to transform the segments into a new business model, which will help AOL to monetize premium ad formats in the future. Analysts believe that investments made by the company in its advertising stack is allowing it to use such trends “broadly, outside its own properties.”

Estimates raised for AOL

AOL, Inc. (NYSE:AOL) has reconfirmed its full year OIBDA guidance of $465 million, and expects increased investment in ad platforms and Gathr.

For FY 2013, UBS analysts have revised their estimates, and now expect gross revenue to come in at $2.31 billion from the previous estimate of $2.28 billion while net revenue is expected at $1.85 billion from previously $1.88 billion. Adjusted OIBDA and Adjusted EPS are expected to come in at $463 million and $2.12, from the earlier estimate of $463 million and $2.12 respectively.

For FY 2014 gross and net revenue are projected to come in at $2.60 billion and $2.02 billion, from the prior estimate of $2.52 billion and $2.07 billion, respectively. Adjusted OIBDA and Adjusted EPS are now expected at $497 million, and $2.17, from earlier the estimate of $484 million and $2.17.

UBS analysts have raised the price target for AOL, Inc. (NYSE:AOL) to $48 from $45 earlier, and have a Buy rating on the stock.