SiriusXM Beats The Street – Stock Hits 52 Week High
SiriusXM announced its quarterly earnings today and the company did not disappoint. Though it was already disclosed that the company had met or exceeded all guidance, the big news was that instead of posting the expected earnings of 2 cents per share, SiriusXM hit 3 cents per share. Highlights included:
- 2014 Revenue Climbs 10% to $4.18 Billion
- Net Income Increases 31% to $493 Million in 2014
- Record Adjusted EBITDA of $1.47 Billion in 2014, up 26%
- 2014 Free Cash Flow Reaches Record $1.16 Billion, up 25%
- $2.5 Billion of Stock Repurchased in 2014
SiriusXM’s quarter included record revenue of $1.09 billion and $4.18 billion for the fourth quarter and full-year, respectively. Net income was $143 million Q4 and $493 million for the full-year. This beat the previous year by a healthy margin. Net income per diluted common share was $0.03 and $0.08, respectively, in the fourth quarter and full-year 2014, versus $0.01 and $0.06 in the fourth quarter and full-year 2013. SiriusXM’s Adjusted EBITDA was $381 million and $1.47 billion, respectively.
SiriusXM’s 2015 guidanjce is as follows:
- Net subscriber additions of approximately 1.2 million,
- Revenue of approximately $4.4 billion,
- Adjusted EBITDA of approximately $1.6 billion, and
- Free cash flow of approximately $1.25 billion.
The company now has 5,643,849,000 fully diluted shares as share buyback’s in 2014 continued. The company bought back 739 million shares during the year and is committed to repurchasing another $1.7 billion worth of stock. Overall, in the last 2 years, the company has retired approximately 1.3 billion shares. SiriusXM has a healthy cash position of $147.7 million.
SiriusXM also reported stable churn of 1.8%, and improvement over the 1.9% we saw last year. The company reported an Average Revenue Per user of $12.49 and a subscriber acquisition cost of $33 per share. The customer service and billing expenses per average subscriber were $1.07, a slight uptick.
An item of concern in the quarterly report was the decline in the companies ability to convert trial subscribers to self-paying subscribers. The conversion rate is now down to 40%. This is the lowest conversion rate that I have seen. the number is less of a concern when car sales are growing, but should be monitored by investors. the conversion speaks to price elasticity and the “stickiness” of the product.
Last year at this time SiriusXM investors were in the throws of debate about a buyout offfer from Liberty media. Ultimately Liberty pulled its offer off of the table. ironically, the stock buyout was at about the $3.69 level we are currently seeing as a 52 week high. Thus far, 2015 has not delivered any excitement on the Liberty media front, but has seen very positive auto sales.
From a technical standpoint, the new 52 week high sets up a bullish stance for SiriusXM. In fact, the bullishness is such that a small run could be in the making. Positive news going forward could stoke the fires. The channel that SiriusXM has traded in all year is, for the moment, broken. If SiriusXm can work through $3.75, there is a distinct possability of testing the $3.80’s. For the first time in months the technicals are showing decent strength across the board. stay Tuned!
Solid numbers again. Will help if they do the good APP upgrades soon and Have to like the upside to the upcoming announcements this summer on the Agero/Telematics agreements that are coming down the pike. The other biggest nugget is they are finally talking about all the spectrum value they have and will be able to monetize further in the next 5-10 years. The extra spectrum will carry so much value. It’s going to be a crawl but I see no way Siriusxm doesn’t climb to double digits over the next couple years.
Double digit share price? That’s a market cap of $56 billion. Kind of a big number, don’t you think?
I believe in combination with the standard satellite radio revenues, the incremental Agero/Telematics deals which will start pouring in starting in summer, and continued buybacks……..there is a ton of value to be exploited over the next few years.
I’ll say it again and they alluded to it in the call. Sirius is continuing to move everything to I believe the XM side of the house…….leaving the sirius spectrum free for many many opportunities. The technology advances (as they said in the call) will continue to increase the actual size of the spectrum available for Siriusxm in the future (Frear or Meyer said 5-10 years. I’m assuming in 2-3 years we will have a much clearer picture of what kind of money and/or usage that spectrum will be for…….thus creating the potential for a double digit stock price. The spectrum is already worth billions
Current market cap is 5 x revenue. Do you have a future ratio in mind that I can hang my hat on?
Alan,
If they remove 800M shares by 2017, the share count would be about 4.85B shares. Revenue by that time could very well hit $5B+ and fcf could hover at $1.5B to $1.6B.
I agree that on strict valuation rules hardly justify $46.5B market cap but there are dozens of companies from tesla to pandora to amazon that have ridiculous valuation and remain quite popular with investors. Neither should we forget that Sirius XM is still a growing company with a transparent robust potential for another decade from now. On top of that, Sirius’s potentially “redundant” spectrum that can be released in early to mid 2020s could be valued in billions of dollars.
I agree with Meyer who keeps repeating, “This is a marathon rather than a sprint”. This is why, barred any calamity in the economy or with siri’s technology/satellites, we should see double digits within the next five years. Today’s economy is super conducive to see these numbers, in particular if gas prices stay under $70 for a couple of years. This could be a bonanza for a discretionary service like sirius.
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SiriusXM’s 2015 guidance is as follows:
•Net subscriber additions of approximately 1.2 million,
•Revenue of approximately $4.4 billion,
•Adjusted EBITDA of approximately $1.6 billion, and
•Free cash flow of approximately $1.25 billion.
Can we take this guidance seriously unless sirius is planning for a calamity.
This is what they should have guided conservatively:
Net subscriber additions of approximately 1.5 million,
•Revenue of approximately $4.5 billion,
•Adjusted EBITDA of approximately $1.7 billion, and
•Free cash flow of approximately $1.31 billion.
Yes, we know about their tendency of guiding low and beating handily their numbers. This time they guided ridiculously low, and this is on the tail of very strong growth that they are touting so loudly. It appears they are contradicting to themselves. The real question is, “Why are they guiding so low?” Is there something on the horizon that will reduce their growth dramatically? I doubt it because both OEM and the used car market segment in particular will be growing well enough for them to add more subs in 2015 than in 2014. On top of that, oil prices may remain under $65-$70 range and folks will get more discretionary income. I can go on and go on with my disappointment of how they are guiding and stalling the stock growth.
And last but not least. Let us not forget that even their profit margin is more than 10% with 8 cents per share in 2014. However, what is ten times more important is that their fcf margin is 25% with almost 20 cents per share. This year there is a strong probability that they will remove between 400M and 500M shares bringing the total share count to 5.1B to 5.2B. If this is going to be the case with the conservative $1.3B fcf estimate the company may generate about 25 cents per share.
This routine of guiding low has become like the boy who cried wolf; nobody really gives their forecasts any credence at this point. They know damn well that, barring some calamitous confluence of events (high gas prices, car sales plummet, economic distress, etc.), the potential exists to take this company to the next level. Despite an almost perfect storm of circumstances – lower gas, higher vehicle sales, best earnings report in years – the stock lies moribund like a rotting corpse. Obviously the management refuses to remove the shackles they have placed on this stock, and though I don’t know exactly what kind of bizarre, twisted sensibility is involved here, I do know that there is very little if any empathy by this company for the Sirius XM shareholders. Satellite radio is literally on the launch pad, and ready for blast off. Unfortunately, there seems to be little interest in hitting the ignition button. It isn’t all the alleged burgeoning technology/competition that is inhibiting satellite radio. The real culprit is Sirius XM themselves. Just think where this company would be with some decent marketing, a less convoluted pricing structure, a return to pre merger quality programming, and some long overdue consideration for their own listeners and shareholders. Timing is everything, as they say, and if Malone and his cronies think they can stifle this company and this stock indefinitely, then they are in for a rude awakening.
Steve O,
You could not say it better. I truly marvel your response.
There is some movement, however, today that, in all honesty, I did not expect, or gave up expecting. If they stay above $3.75 for a couple of weeks we may see the rise of this ailing phoenix.
Thanks sirifair6. I read your post, and it inspired me to elaborate on what you so eloquently asserted. It’s like they have some weird agenda to keep any positive news a secret, almost resolute is their desire to down play any good news, or at least make sure that nobody gets too enthusiastic and actually subscribes, or becomes a stockholder. When I first became aware of satellite radio, I remember there being a ton of excitement about it, and people were fascinated that there might be an alternative to dismal, unlistenable terrestrial radio. I know I felt that way, and did for a long time. This companies apathy and inept management has sucked the very life out of all the hopes and dreams that so many millions of satellite converts had in the beginning. It amazes me how common sense and basic problem solving somehow proves to elude an absurdly overpaid and supposedly intelligent management team. Satellite radio has much untapped potential that sadly may never be exploited to the fullest. If it doesn’t reach that potential, it will be very sad to look back and realize that greed, stupidity and lack of commitment was the cause.
I think that Sirius XM is doing very well, it is becoming a well-run stable company. On the other hand competitors the likes of Pandora are struggling.
I see SIRI going above $4 by Summertime 🙂
I, too, do not like to see the conversion rate at 40%. However, as one who made his living selling for a half century, if I successfully sold 40% of the people I contacted, that would be a huge success rate.
On the subject of share buy backs, while it can be irritating the stock isn’t moving up significantly, we are now benefiting from a smaller share count. Meaning, every share now bought at 3.50 buys a bigger percentage of the share base than past purchases.
I have started to keep an eye on the float.
Per Spencer, the outstanding share count is 5,643,849,000. This means that non-liberty shares amount to about 2.3B of which retail is about 600M to 700M.
I am confident that if the stock moves up to $4 or so retail may sell off another 300M shares darn quickly. My point is that by 2017 the retail float may get to around 250M shares or even less. It would be interesting to see the impact of such small retail float on the share price, with liberty and insttutions owning about 95% of all shares.
On the pace if buybacks, I do not see siri removing more than 300M shares in 2015 unless they borrow another $500M. The same would apply to 2016. To be conservative, I am not accounting here for a very strong sub growth (more than 2M net subs per year), price increase or some other meaningful revenue source in the hundreds of millions.
If Siri brakes resistance at $3.88 I expect it go past $4 quickly
It has broken $3.88 several times reaching $3.89. Honestly, I did not expect such a healthy run. However, it may be short-lived. We shall see.
The market is forward looking correct.Are the bulls scared of stern retirement. If he does. He had that birthday bash. Can’t really top that one. I’m hoping its wasn’t a retirement party in disguise. I believe around 2 million subs pays his contract. But if he is paid a much lower amount for the tapes and the 10 years at siriusxm. There is a added 100 million right to the bottom line. Its a dangerous way to think but with arties saga, robins bout with cancer,im not sure if he will retire. On the other hand besides art and kittens I think Howard would hate not being on mic. What’s people’s thought on starting at 7am is it to compare numbers to opie and Norton. We are so close to the 5 dollar mark to truly get out of so called penny land and have the big institutions hop on. When that happens the skies the limit in my eyes. So we march on and pray be stays.I just think this is all my opinion but less days and change of hours is a way to wean people off of everyday Howard.But the 5 dollar retention program is Def working. Sorry I’m all over the place I’m just mad I sold some at 3.70 and as soon as the sale went threw it shot to 3.95. Its like I wanna sell again so it goes up another 30 cents lol thanks guys for hearing me out. One last thing I have a Lifetime internet plan but the only channel I’m missing is opine and Jim there like the new premium channel and I miss them. Thank god for you-tube. And I think if Pandora keeps dropping Sirius is waiting for the right time to scoop them up I wonder how many people pay the 5 a months for no skips. Its odd its the same price as Sirius retention plan. I’m filibusting sorry……GOD BLESS