David Joyce of Miller Tabak issued a report today on Sirius XM Radio. Citing the debt issue, the analyst lowered his price target from $1.00 to $.50 in the short term, and went from a long term $3.00 to $2.00. Considering the current prices of Sirius XM Stock, getting to these levels would be quite an accomplishment. Joyce maintained a neutral rating on the equity. Sirius XM saw a boost in share price amid speculation that EchoStar was acquiring large portions of Sirius XM's debt
Joyce is expecting Q4 earnings to be announced in the next two to three weeks, and is still estimating net subscriber additions of 460,000 with retail bringing in 253,000 and OEM 201,000. He remains cautious due to the economic environment though. This would bring the subscriber count to finish the year to about 19.38 million.
David expects 4Q08 revenue of $614 million and a $(93) million Loss from Operations (OCF). For Q4 they are expecting a Net Loss of $(239) million or $(0.08)/share, and positive Free Cash Flow of +$66 million. The $66 million of expected FCF + $360 million of cash at the end of 3Q08 would give the company $420 million of potential cash. In their estimation, this cash could help deal with the $175 million of 2.5% convertible debt due 2/17/09.
Showing some caution, Joyce brings up the issues of dilution, change of control, or bankruptcy-like restructuring, or something in between, which could play out during the course of coming months. On the Echostar news the analyst notes that the accumulation of SIRI debt may pave the way for EchoStar to have a say in how the company evolves, operationally and financially, from here. He also noted, "SIRI satellites already provide a few video channels to certain automotive models, so it would not be too far of a stretch to consider some form of satellite communications combination here."
Position: Long Sirius XM Radio