Sirius XM Analyst Round-Up – Q1
Earlier this week Sirius XM Radio completed their first quarter conference call, and the stock saw a sell-off on what has been perceived to be a mixed bag of news. Overall, the company demonstrated some solid metrics and reiterrated their 2010 guidance, which would seem to indicate that the company has no worries about some of the metrics that may not have been as strong as some were anticipating.
Several analysts have now had some time to digest the information provided by the company and apply them to their models. This created a wave of analyst reports issued in the last couple of days. Here is some perspectives of the analysts that follow the company.
MURRAY ARENSON – BGB SECURITIES
Arenson currently has a BUY on Sirius XM Radio with a price target of $1.35. Previously the analyst had a price target of $1.15. Arenson notes that the company has strong cash flow, but does put some caution to upcoming costs (SAC) associated with a ramp up in auto production. Considering all factors, the analyst feels that valuation on revenue from subscriber growth will justify his price target.
The BUY rating at BGB means that the expected return on this equity will be better than the S&P over the next 12 months.
Jim Goss – Barrington Research
Goss carries and Outperform rating on Sirius XM Radio, with a 12 month price target of $1.25. The analyst feels that the company is on track with subscriber growth, revenue growth, and their path to profits. He notes that the fundamentals of the company appear strong, and that Sirius XM’s balance sheet is improving.
Goss does feel that the company should still consider a non-forced reverse split to get the trading price above $1.00 to attract institutional investors. Agree or disagree, this is the analysts opinion. This opinion will certainly have its proponents as well as opponents.
Among other things, Goss leaves room to raise his price target as the 2011 projections fall into place. As long as Sirius XM can hit their numbers, a price target increase from Goss seems a virtual certainty.
Gabelli & Company, Inc.
Gabelli carries some interesting EBITDA estimates for Sirius XM Radio. According to the firm, the actual EBITDA for Sirius XM in 2009 was $351 million. Gabelli estimates that 2010 will bring the EBITDA number up to $554 million, an impressive 59% increase. The analyst takes it out even further with an estimate on 2011 EBITDA at $718 million, a 30% increase from their 2010 estimate.
The firm rates Sirius XM as a Buy with a 2011 price target of $1.25.
Lev Polinsky – JP Morgan
Polinsky is Neutral on Sirius XM Radio. The analyst stated that Sirius XM beat their estimates on EBITDA, but missed on revenue. Polinsky uses a 17X multiple on their 2010 estimates and 17X their 2011, and is therefore cautious that any hiccup could take the equity below their targets, and create a situation where a higher multiple may not be justified.
I would say that Polinsky is exercising caution as the reliance on the auto channel does create some uncertainty.
Matthew Harrigan – Wunderlich Securities
Harrigan has a Hold on Sirius XM with a price target of $1.25. The analyst stated that Sirius XM provided, “excellent Q1 results for both top line and expense control.” Harrington notes that the content provided by Sirius XM sets itself apart from services such as Slacker and Pandora. He is also bullish on the OEM channel, and feels that the Certified Pre-owned programs could become a game changer.
Barton Crockett – Lazard Capital Markets
Analyst Barton Crockett carries a buy rating on Sirius XM with a price target of $1.35. Based on Karmazins announcement that the company had added about 59,000 subscribers in April, Crockett feels that Sirius XM will beat their own guidance, as well as Lazard’s estimate of 613,000 for 2010. The analyst sees revenue flattening out for the balance of 2010, which somewhat tempers his overall outlook.
The firm is using a 13.9 multiple on estimated 2011 adjusted EBITDA to arrive at their price target.
Tuna Amobi – Standard & Poors
Amobi rates Sirius XM with a “Hold” and a 12 month price target of $1.50. The analyst is projecting 550-800K net subscriber additions for 2010 with continued self-pay churn of 2% and EBITDA of $599mm for ‘10 and $689mm for ‘11.
“Our 12-month target price of $1.50 reflects ample 2010 and 2011 13.0X-13.5X EV/EBITDA, or $400-$450 per subscriber, on relatively strong cash flow growth — also noting over $8 billion of potentially valuable NOLs.”
David Bank – RBC Capital
David Bank, raised his price target on Sirius XM to $1.00 from the previous target of $0.75. The analyst is keeping a SECTOR PERFORM rating on the stock, and can be considered the bear in the analyst group. Bank noted that Sirius XM has several positives going for it, but believes that these positives are already priced into the stock.
The analyst says Sirius XM is at 18X 2010E EV/EBITDA, which he feels is already too aggressive.
As you can see, the analyst community seems to be pretty consistent with their take on Sirius XM Radio. Some analyst are predicting that Sirius XM will raise guidance in Q2, and that Q2 will essentially tell the story for the balance of the year. Confidence in Sirius XM’s ability to clean up the balance sheet and hit targets seems to be high.
Position – Long Sirius XM Radio
Tuna Amobi of Standard & Poors is sitting with a “Hold” and a 12 month price target of $1.50. The Big Tuna is projecting 550-800K net-ads for 2010 with continued self-pay churn of 2% and EBITDA of $599mm for ’10 and $689mm for ’11.
According to S&P . . .
“Our 12-month target price of $1.50 reflects ample
2010 and 2011 13.0X-13.5X EV/EBITDA, or
$400-$450 per subscriber, on relatively strong
cash flow growth — also noting over $8 billion
of potentially valuable NOLs.”
Excellent roundup Spencer. Did you notice that every single analyst uses and EV/EBITDA multiple. Sirius had positive EPS for the first and dropped – Because nobody values on eps in media!
Can you please get it through your readers’ heads that EBITDA is how Wall Street values a media stock! AND ALWAYS WILL!!!!!
I am getting a TTR1 today. That way I can listen to Sirius 3 ways in my home – 2 computers, and on the TTR1 with no wires!
I am getting a Droid at the end of May so I can listen to Sirius on my walk to the train, and inside the elevated subway too.
I have Sirius in my car and I can listen on my computer at work.
Am I missing a way to listen? 🙂
Hey Muscle . . how ’bout this:
You are on your way to work with your spiffy new Droid, all plugged-in to the Siri-App, but alas no Howard Stern. What’s a mensch to do?
Here’s what you do. Before you leave that apartment of yours to head to work in Manhattan (why else ride the elevated subway unless going to our favorite place in Queens to watch Ike slam 2 dingers):
1.) You fire-up your internet subscription; set volume to normal speaking voice (don’t over-modulate) and tune in Howard Stern;
2.) You grab your wife’s cel phone (unlimited plan of course);
3.) You dial your cel # from your wife’s phone;
4.) Your spiffy new Droid rings (Howie Rose “Put-it-in-the-books” ringtone of course);
5.) You answer your Droid and exchange a few pleasantries with yourself, then you lay the wife’s cel down next to your computer speaker (put a small towel under it first to dampen any vibration).
6.) Last, plug in your blue-tooth and enjoy the sounds of Howard Stern over your phone while commuting into work.
Being the only guy listening to Stern over the phone, you’ll be a gansa macha on the elevated subway!
LOL!!! Hilarious! Good plan but my wife leaves for work before me!
I am banking on the new contract putting Howard on the Sirius app, but I did read on the net there are ways on the Droid to get Howard’s show. Not sure how.
Thanks for a very informative article.
Anyone read through the 10-Q.
One thing that really stood out to me was the revenue share with GM. There was an almost 50% drop in the payments to GM from 4th Q to 1st. I know Mel mentioned a few times that the new deal was much friendlier, but this number is significant. It may equate to 25M over the full year based on the 1stQ difference.
I also read that GM and Honda representatives will no longer be up for re-election to the Board of Directors for the May 27th annual meeting vote.
I’m glad to see them cleaning this up and taking complete control of their own company now that Liberty is on board.
Sirius XM Radio Inc.: Standard & Poor’s equity analyst Tuna Amobi maintained a hold opinion and $1.50 price target on shares of Sirius XM Radio Inc. (SIRI) on May 4.
Amobi said in a posting on the S&P MarketScope service that the company’s first-quarter EPS of 1 cent, vs. a 7-cent loss per share one year earlier, was 1 cent above his estimate.
“We see continued auto OEM channel momentum, vs. persistent retail after-market woes, as SIRI now looks to [the] used car market,” Amobi wrote. He said Sirius XM affirmed over 500,000 net subscriber additions in 2010, 20% adjusted EBITDA growth, and positive free cash flow.
“With delisting (and reverse split) clouds dissipating, and [the prospect of] of reupping Howard Stern (perhaps on different terms)”, the analyst said he was maintaining his $1.50 price target on Sirius XM.