Miller Tabak Raises Price Target On Sirius XM Radio
David Joyce, an analyst for Miller Tabak, issued a report this morning raising his price target on Sirius XM Radio from .30 cents to .50 cents in the short term, and also established a long term price target of $1.25. The analyst remains neutral on the stock, but even the short term target would represent over a 20% gain from current trading levels.
Joyce cites both positive and negative aspects on various metrics. On the down-side he notes lower subscriber net adds in 2009, and higher interest expense related to the Liberty Media Capital Group debt and preferred investments for 40% of SIRI equity that rescued the company from potential bankruptcy proceedings. On the upside, Joyce notes that Sirius XM Radio is delivering greater than expected on costs of operations, noting that cost reductions are substantial.
Miller Tabak maintained a neutral rating. The firm notes that the neutral position is mostly associated with the current state of the economy, and some cash burn risk. This would seem to indicate that when the economy sees recovery or stabilization, that the firm has room to adjust the rating. Joyce notes that the removal of a bankruptcy threat is giving increased confidence in the equity.
On the subscriber front, Tabak now estimates that Sirius XM will deliver 556,000 NET subscribers in 2009. Joyce had previously anticipated 1,253,000 for the year. Joyce also delves into the ARPU issue which measures the average revenue per subscriber. Joyce has raised his ARPU estimate for 2009 from $10.16 to $10.29 mostly due to subscribers taking advantage of the “Best Of” programming which runs $16.99 per month. Given these factors, Joyce anticipates 2009 revenue of $2.507 bn (+2%), down from their prior $2.583 bn estimate, and with heavy and rapid cost-cutting, they expect OIBDA of $317 mm, up from their prior $291 mm estimate.
While it is argued that the Liberty deal saved the company, the interest expenses will be higher going forward. Tabak anticipates payments of $376 million, which is substantially higher than their previous estimate of $227 million. Given this factor, Joyce sees Free Cash Flow of $(35) million, down from +$66 million.
It is good to see that the street is beginning to follow the equity once again, and that analysts are looking beyond the debt issue as well as subscriber numbers. People looking at this company on a performance level of money metrics, cash flow, and control of costs.
Position: Long Sirius XM Radio
My one and only concern right now Tyler – 2 weeks to the baseball season and still no MLB on Sirius. None of the analysts are addressing this. Is it going to go to the final day??
If we get a baseball deal, I see smooth sailing with the refinancing already completed and the iPhone app coming in the second quarter. We just NEED BASEBALL.
This is an excellent Report Tyler,Thank you for posting it here.
Explains all aspects of Bussiness Metrics(positive and negative)
A little worried about the Neg FCF for year(cash burn)didn’t expect that..I think the key number in 1Q I want to see is Revenue from Best of And Pre pay numbers.This should raise ARPU
considerably from 4Q and negate what i beleive could be NEG SUB ADD for 1Q 09.Realistic price targets also,in line with my thoughts for 09..
Seems to match the price targets I gave on Yahoo and was almost castrated, for even suggesting.
castrated because they were considered by those idiots as too high SP targets?
Can someone give me a rough idea of what “long-term price target” means? About a year’s worth of time?
I agree….what is long term? A year? Two years??
If the $1.25 target is anything later than Jan 2010, then I think Tabak is GROSSLY underestimating the value of SIRI.
I’m betting we’re near a buck by the end of Q3.
Cheers,
-Whynot
so baseball only available on XM? So that just means sirius subs have to order best of XM package? if so, whats the big deal then
Gary – It’s not available on Best of XM. There is no deal yet. Having MLB on Best of XM is exactly what I am hoping for.
As far as I am concerned Baseball on Sirius is a MUST! You have about 9 million subs without access to baseball. Brandon says go out and buy a Mirge radio. That makes absolutely no business sense when compared to getting it available on Best Of XM. Look what Stern and the NFL are doing for Best Of Sirius subs on XM! The numbers are amazing. GET BASEBALL ON SIRIUS!
SIRI is in a good shape to buy, and I think its future will be bright as the market grows. My recommendation is to buy SIRI and hold as long as you can afford. I did buy couple of thousands shares from SIRI when it was 0.23 cents and I am holding it because I think it is the time for traders to become investors with SIRI: to make a incredible profit, and help this company to develop. However, keep your smart attention on upcoming news too. Don’t let others to pool you and don’t be too much arrogant and greedy too.
You’re making recommendations owning 2000 shares at 0.23? That’s really kind of you John.
Hey Homer,
I’ve read and look for many of your posts on yahoo and appreciate your well-thought responses. Remember, that most on the board are idiots trying to serve their own personal interests. When your comments do not coinside with their agendas they attack. Keep giving solid feedback and advice, others watching like me view you as a resource.
Am still very happy with the direction SIRI is going. I bought shares at .14 and have enjoyed the ride since.
I think Baseball on Sirius will set this ship sailing. Once they do that ride it out, then get out to make a nice profit.
It is sort of a Joke Still, but……….
Thank the Lord and Kaz for no BK!
Now can we get something rolling, yes, like Muscle13 suggests, MLB!!!
Also, just how long does it take to get an App out that we have all been waiting years for? I mean, didn’t we just take it from someone else the other day?? ‘Spit’ it out already, why wait for Q2? We delayed the CC, only to announce still a week early….!!?? What was that about………like Syke everyone??!!
It was harmful to the pps……………unless cronyism/nepotism was at work here and everyone ‘else but us’ made out, and are currently ‘making out’ like bandits as we continue the freaking coaster ride……..
Sorry for ranting……………..
Dios mio, I have Kids to feed!! LOL, jus kidding……….. 😉
I know I am repeating myself but I wrote to Ryan and Tyler about this today. Ryan completely agrees with me. I don’t know what Tyler thinks
———————————————————
Email –
Subject: I am going to blow my stack
The whole reason for the merger was to get content available to all subs. It was not just to cut costs. Baseball NFL, Howard & O&A, Oprah and Martha available on Sirius and XM. Thats the reason!
If Baseball doesn’t get on Sirius I will be absolutely horrified!
Thats the merger! Nobody understands this!
My wife just laughed and said to me “How will you blow your Stack”? LOL
Answer – I honestly think I might cancel my Sirius subscription if we don’t get access to baseball. To me that was the whole reason for the merger.
agreed !
😉
How is it an upgrade…on feb 5 09 you posted an article saying: 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.
must have been a big drop between then and now that Im missing.
I did not say there was an upgrade. I was quite clear in stating that his rating on the stock remained neutral. He did raise his price target fro 30 cents to fifty cents.
While I do get most reports, I do not get them all. This report was covered nowhere but here. For what reason I do not know.