JP Morgan Initiates Coverage on Sirius XM
JP Morgan has initiated coverage on Sirius XM Radio, and published a report with a NEUTRAL rating. Analyst Lev Polinsky believes that while the cost cutting being accomplished by management is very good, that the weak auto sector and debt load cloud the issue.
Like other analysts, Polinsky deals with the subscriber issue first noting that Q1 subs disappointed. The net decline of 404K subs was primarily attributable a drop-off in paid promotional subs. The analyst noted, “self-pay subscriptions fell by 113K and churn (self pay) rose to 2.2%, from 1.9% in Q1’08 and 1.8% in Q4. Polinsky models that the company will finish the year with 200,000 less subscribers than they currently have. A similar situation is what they have modeled for ARPU, which they feel will decline slightly beyond current levels.
On the financial metrics, Polinsky notes, “Impressive cost-cutting in Q1… Even against the diminished user base, the company executed well in its effort to show synergies in the cost structure; Adjusted EBITDA for the quarter was $109M, compared to ($64M) in the year-ago quarter.” Polinsky has modeled a $345M in EBITDA for 2009 and $364M in 2010. Managements statement that Sirius XM has sufficient liquidity to meet all its debt obligations in both 2009 and 2010 is a positive.
From an investors standpoint it is good to see additional analysts joining in and following Sirius XM. The wide variety of opinion investors enjoyed only a year ago had diminished to a point where investors saw very little contrast in reports.
Position – Long Sirius XM
Why cover a stock with a neutral? If you have no opinion, then why cover it. These ANAL-ysts really have no clue.
Despite the ‘analvision’ of these analysts, I agree with TS, and at the very least welcome more commentary on this company by the financial media conglomerate, as invariably, someone will ‘see the light’………..
The most important part of an anaylst covering a stock is it shows that their is more credibility to the stock. If no one covers the stock it is somewhat like a tree falling in the woods, does it make a sound if no one is around to hear it. It has peaked his interest and he’s putting his toe in the water. Yes, anaylst are like movie critics and if there are no critics watching your movie, well it’s not a good sign. The ball is in Sirius Xm’s court and what they do w/ it is what we are waiting to see. They have been doing a good job dribbling but we need to see how they want to set up their plays and then finally does their playbook score points. My take is this quarter will be a litmus test of what the game plan will be and if it has merit. Then the last 2 Q’s will tell us if they can score enough points to win.
Unless they are covering it for their own personal gain. Remember Jacoby and the a-hole from GS?
To all whom own it,stay the course w/your Sirius stock.
Keep an eye on,but do not take total credence just w/dropping auto sales. Sirius has other “irons in the fire” worth stock holders following. With possible suitor Direct TV and a chance of possible future infiltration of Apple’s Iphone,plus the liquidity to meet their debts thru 2010,this stock is well worth holding on to.
Im far from a market phenom,but own it and w/do dilligence and patience we’ll all reap our just rewards in the next 18mo-3yrs.
Good luck to all whom have the witherall and patience to hold.
If sirixm can find a way to stream Internet satelite radio and television to every I pod without the customers having to buy them with a telephone subscription and allow the phone companies to battle over customers with dirt cheap unlimited no contract plans then finally the tables would turn.