Doctorex speaks: $17 is not high enough.
Please refer to the previous analysis by doctorex indicating that $17 per share is a reasonable steady state mature price for SIRI.
$17 IS NOT HIGH ENOUGH.
there are about 250,000,000 SIRI target vehicles in the u.s.a. of these, about 40%, let us say, hate advertising so much that, once exposed to siri, they will be lifetime customers. this corresponds to the current 44% long-term take-up rate among new car buyers. this represents a fully mature count of about 100 million subs. count doctorex among this group.
100 million subs at $15 per month is $1.5 billion per month revenue, or about $18 billion annual revenue.
at least half of this would be pure GAAP profit. prove it by looking at the last quarterly report. total SIRI expenses for everything, including financing, etc., are about $700 million quarterly, or $8 billion annual. variable costs are almost zero, because the satellites are in place already, and all management has to do to service additional subs is basically to throw a switch and turn on their receivers.
therefore 100 million subs would represent revenue of about $18 billion and profit, let us say, because of low variable cost, of about $1 billion per month, or $12 billion per year. (this particular step is based on conservative assumptions.)
apply a p/e. considering the strong prospects outlined, a p/e of 30 is reasonable. ebay, msft, and google were all p/e of 100 or higher at some point.
this calculates to enterprise value of $360 billion, which is approximately the value of GE or MSFT at their high points. this is a little bit high, maybe, but not by much, if we have 100 million subs.
divide total enterprise value by 4 billion shares, and voila, $90 per share.
DOCTOREX DECLARES $90 PER SIRI SHARE IS POSSIBLE. BUY. BUY. BUY.
