The brokerage kept its America Online rating of near- and long-term buy. Coverage of Time Warner, the world's biggest media company, was reinstated with a rating of near- and long-term buy.

America Online, the No. 1 Internet service provider, was up 4-7/8 at 54-1/2. Time Warner rose 5-5/8 to 79-1/8.

America Online was the most active issue on the New York Stock Exchange and Time Warner ranked eighth. The start of trade for both companies' shares were delayed because of order imbalances.

The value of the merger has fallen sharply since America Online said on Jan. 10 that it would buy Time Warner in an all-stock deal originally valued at $160 billion.

America Online had fallen from 72-7/8 just before the deal was announced. Shares in Time Warner, home to media properties ranging from Cable News Network to Time and Sports Illustrated magazines, traded at about 98-1/4 just after the January announcement.

Wall Street has had difficulty weighing the transaction and the resulting company because of the different values and performances of America Online, a fast-growing Internet company, with those of Time Warner, a long-established and multifaceted giant.

Merrill Lynch media analyst Jessica Reif Cohen and Internet analyst Henry Blodget said the combined company would benefit from the impact of the Internet on media industries.

"We regard the stock as a core holding if for no other reason than this," they said in a report.

The 12- to 18-month price target for AOL was set at $90.

"In an industry evolving this quickly, we believe competitive positioning and brand ownership are more important drivers of stock performance than precise valuation analyses."

Cohen and Blodget said the slump in both stocks represented an "excellent buying opportunity.

"Given the (surprising) lack of spread, we are indifferent as to which stock investors buy."