Stifel analyst Kit Springs issued a report today in which he lowered estimates in the subscriber and revenue category, but maintained a BUY rating with a price target of $1.25. Springs notes several factors in his report, but mostly ties the lowered guidance to weak auto sales. According to Spring car sales will come in at 13.5 million for the year rather than 13.8 million.
Among items that could be perceived as positive was the NPD retail sales which were not down as far as Springs anticipated. While September sales were down 7%, and quarter sales were down 10% it was a better number than the 25% down that the analyst was anticipating.
The Stifel buy rating with a target price to $1.25 is based on a 5 year DCF with 11.4% WACC and 7.6x terminal EBITDA multiple. Spring states, "100% downside seems like an increasingly likely scenario. That said, we see several multiples of upside possible should SIRI refinance successfully, potentially realistic should churn remain solid."
Springs Notes The Following:
For 3Q08 we estimate pro forma:
- Net subscriber additions 321k vs. 435k previously
- Self pay churn 1.76% vs. 1.75%
- Revenues of $618.9MM vs. $619.1MM due to lower OEM additions
- EBITDA of ($76MM) vs. ($86.2MM) as subscribers are initially dilutive
- EPS of ($0.08), unchanged
For the full year 2008:
- Net subscriber additions 1.76MM vs. 2.17MM
- Self pay churn 1.74%, unchanged
- Revenues of $2.418B vs. $2.419B
- EBITDA of ($313MM) vs. (349MM)
- EPS of ($0.32) vs. ($0.33)
For the full year 2009:
- Net subscriber additions 1.99MM vs. 2.13MM
- Self pay churn 1.84% vs. 1.81%
- Revenues of $2.65B vs. $2.71B
- EBITDA of $253MM vs. $293MM
- EPS of ($0.15) vs. ($0.13)
Position - Long SIRI