While most Wall Street analysts have rallied around the combination of the world's largest Internet services company and top media conglomerate to remake the way people communicate and are entertained, they have also cautioned that investors must embrace more conservative measures of stock valuation.

"Everybody is bailing out," said one New York Stock Exchange trader in the stock. "The value guys, retail, the big media investors plus the (arbitrageurs) are all over it. I'm just seeing across-the-board selling," he said.

Shares of AOL fell another 4-7/8 to close at 60-1/8, near its session lows, extending a three-day slide from more than 72, as more than 46 million shares changed hands on the New York Stock Exchange.

Time Warner, whose value is tied to that of AOL shares under the proposed deal, dropped 5-1/2 to 79-1/4, down 20 from its peak on Monday after the deal was announced.

The value of the merger to Time Warner shareholders fell to $135 billion, down from a high above $190 billion in the enthusiasm that greeted the deal when it was first announced early Monday.

"I couldn't think of a worse scenario for this deal," the trader said. "The only thing that can stop the slide is if they pull the bid."

But PaineWebber analyst James Preissler characterized the selling pressure as short term, stemming from the flight of momentum investors from the stock amid fear the merger could slow AOL's historic growth rates and meteoric share-price gains.

"AOL has a good base of long-term owners who are holding it for long term," said the PaineWebber analyst, who continues to recommend the stock as a "buy" and calls it his "Best Pick."

America Online counts more than 2 million shareholders among its investment base, many of whom were drawn to the stock during the past year during its explosive rise. Of the roughly 2.58 billion shares, just over 46 percent of the stock is held by institutional holders, with the rest of it in individual — or so-called "retail" — hands, according to First Call/Thomson Financial data.

Preissler said America Online's earnings report next Wednesday could serve as a near-term catalyst for the stock. "The earnings release will again remind investors how big and powerful AOL is, even as stand-alone company," he said.

AOL's share price decline — and a drop in the price of rival Yahoo! Inc. (YHOO.O) despite Tuesday's solid earnings report and the declaration of a two-for-one stock split — cast a shadow over the Internet stock sector generally on Wednesday.

Yahoo shares were off 33 at 364-6/16, the second day of sharp declines, on the Nasdaq stock market.

"The only positive is that all the Internets are getting knocked around so it may take some of the air out of the bubble," the AOL trader said, referring to a common concern heard on Wall Street about the sector's sky-high valuations.

Preissler said Internet investors are faced with having to value the AOL-Time Warner deal by a set of investment measures favored by traditional media shareholders, like cash flow, rather than simply focusing on potential revenue growth.

"It begs the question: If investors are forced to start evaluating these other metrics — like cash flow, subscribers, earnings — do they get concerned looking at some of these other Internet companies in the sector at large?" he said.

Wall Street experts have said the stock activity did not indicate skepticism about the deal's prospects for completion, but instead represented the realization that a flood of new shares would be issued as the top Internet service provider acquires a traditional and slower-growing media group.

On Tuesday, Merrill Lynch analyst Henry Blodget warned that America Online's share price could sink as low as 55 as investors digest the terms of the deal and what it means for AOL stock during the year it takes the deal to close, as well as its long-term growth rate when blended with Time Warner.

The deal, announced early on Monday, is expected to transform the media and technology worlds, uniting Time Warner's stable of assets that include Sports Illustrated, Looney Tunes and CNN with the powerhouse company that has brought the Internet into households around the world.

It also is expected to trigger a wave of similar transactions linking traditional media companies with their cyberspace counterparts.