UBS issued a report today on Sirius satellite Radio. The firm expects Sirius to maintain the subscriber growth lead throughout the year, as well as improved metrics.
Continued Lead in Share of Net Additions Expected in 2Q07
We expect SIRI to maintain its lead in subscriber growth during 2Q07
SIRI will announce its 2Q07 results before the open on July 31, with an 8:00am conference call that morning. We expect SIRI to report 444k net additions during the quarter, which would represent 60% share of net additions in the industry. However, while we expect continued growth in gross additions for SIRI, which supports our thesis that demand is improving, we continue to expect net additions to decline through 1Q08.
2Q07 expected to show improvement in EBITDA and EPS
We estimate subscriber revenue of $212M, up 54% y-y, total revenue of $226M, up 51% y-y. Our SAC estimate of $105 reflects a 20% y-y decline, which contributed to our EBITDA estimate of $(72.6)M, a 43% improvement over 2Q06. Our EPS estimate of $(0.10) is flat with 1Q07 and 42% better than 2Q06.
Updates on merger progress expected during the call
The first round of comments for the FCC have been submitted. The deadline for reply comments from XM and SIRI is July 24. While the process for the merger continues to move forward, we believe the next key milestone will be comments from the DOJ on competition. We do not expect a decision until late 3Q/early 4Q.
Valuation: Maintain Buy 2; Modestly raising target to $3.75 from $3.70
We base our price target on a detailed DCF analysis. We use a 3% growth in perpetuity and a 13% WACC.
Position - Long Sirius - IMOJB-