Goldman Sachs analyst Mark Weinkes outlined a bearish situation for SDARS that sent both Sirius and XM plummeting lower on heavy volume. Weinkes, who has been bearish for quite some time went grizzly bearish. Both Sirius and XM had staved off previous anticipated Goldman lows now, but new price targets set even lower seem to have taken the feet right out from under satellite radio.
Weinkes established new price targets of $1.75 and $6.50 for Sirius and XM respectively. These new prices are down from $2.25 and $11.50. The new prices would give more implied room at the bottom than many previously anticipated, and the new lower targets could well have given short traders more confidence that a short position would pay off better than they previously had thought.
Goldman cites slowdowns in subscriber growth, debt refinancing, existing costs associated with debt, and a lower revenue per subscriber as some of the reasons for their latest thoughts on this sector. The lower price targets even with a merger are frustrating enough for longs, but a $1.00 stand alone price on Sirius shows that Weinkes is no fan of the satellite radio business model.
All of this transpires just as it appears that Sirius and XM may be on the verge of FCC approval of the license transfer, paving the way for the companies to merge. Goldman sits at the direct opposite end of the spectrum than Citigroup, which has much higher price targets for a merged company. So far it would appear that Goldman has a large audience listening to their analysis.
Position - Long Sirius, Long XM