Liberty Upgrade Could Spill Over To Sirius XM…Maybe
Last week Deutsche Bank analyst Doug Mitchelson upgraded Liberty Media to a “Buy” from “Hold” and established a $15 price target. The upgrade was good news for Sirius XM Radio because in part, Mitchelson’s reasoning for the upgrade centered on Liberty’s existing investment into Sirius XM, as well as the potential that Liberty may be interested in acquiring even more stock in the satellite radio company.
What most already know is that Liberty Media came through on financing for Sirius XM that gave them a 40% stake in the company. What has not been realized yet is exactly what Liberty plans to do with their new investment into the satellite radio space. There are many potential synergies that exist, among them a possible larger video offering, or even bundled subscription and marketing plans. At this point, speculation is all that we have.
One thing that I find interesting is that the Liberty spike in price on the upgrade has held. Liberty stock (LCAPA) has traded near the $10 mark ever since the upgrade. This could be an indication that the street has a belief in the reasoning behind the upgrade. On the cautious side I would like to see the price of Liberty hold for the balance of the week. With Sirius XM likely to report their number for Q1 in early May, it will be interesting to see how Liberty and Sirius XM play off of each other going forward.
For their part, Sirius XM has been trading between .30 and .40 for some time, and seems to be building a base here. I suspect that the subscriber numbers for Sirius XM will actually decrease in Q1, but that other metrics will be the center of attention. Q1 2009 represents the first full quarter of merger synergies coming to fruition. If the company shows improved financial metrics even with a net loss in subscribers, then the viability of the business plan as a merged entity may begin to shine through.
If investors in this sector have not begun to follow Liberty yet, I would strongly suggest adding the symbol to your watch list. The next few weeks will be interesting, and given Liberty’s substantial position in the company, people should keep a close eye on sentiment of that stock as well.
Siri set to go higher!!!!!!!!!!!!!!!!!
Tyler, Great article! Deuthche Bank’s upgrade was based heavily due to their recent investment in Sirius Xm. I also believe you are right that these 2 companies will both gain because of synergies. I think the most important gain for Sirius Xm is that this media partner could play an instrumental part in the marketing strategy. Not just due to possible bundling of product but of helping Sirius Xm develop a marketing strategy of its own. I still am intrigued by the one idea mentioned by the president of Liberty Media of the possibility of turning on all of the idle units, w/ a commercial based format. This would mean every Sat. radio adds value to the company. I know w/ the down economy advert. dollars are hard to come by, but when things do turn around this could be a real blow the NAB while increasing Sirius Xm’s revenues. I just hate to see millions of Sat. radios sitting idle (just the cost factor to get them out there seems such a waste).
S&P says SIRI still junk but now rated CCC+
Whoopee….
That’s the ‘spill-over’ !!
“Upgrades inevitable” I read on this site, and it’s happening !!!………………..the kept at ‘junk’ piece is probably a buy-in opportunity for, who knows ??
Maybe You 😉
S & P just upgraded Sirius credit ratings on the heals of your article and it looks like it recovered a bit after hours.
Tyler
Where the hell have you been!!! Great article!! Picked up a small piece of LCAPA yesterday at the low for the day. Already paid a small premium. Your right, the longer that the Liberty price holds above $10 we should begin to see some carryover to SiriusXM. With the upgrade for SiriusXM, I will be looking at Liberty even closer to see any price correlations. Keep up the good work.
Sounds positive. Bought shares today.
Vapor………You KNOW I did today. LOL. Socal.
Isn’t 4/15 the last day before Sirius can shop itself for another better deal if they like ? The way I understood it, they could not shop themselves around until this date, but now they can and could present an offer to the Board of Liberty if it is in everyone’s best interest.
I doubt they will get a better one, but who knows.
sxm
Once SiriusXM and Liberty finalized phase 2 of their agreement…That put an end to Sirius being able to recind the Liberty offer!
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Picked up 14500 shares today at .3422. Hopefully, the upgrade will finally put my Siri holdings into the black(green)