Originally Posted by
Faulkner_SA
I want to expand on this. (I thought I did earlier but don't see it... who knows... I know I typed it...)
Anyways taking the same formula above you can pull it out through 2020. This assumes the exact same pace of buybacks which means increasingly using cash and less use of debt. It's doable... but possibly not to the extremes I'll illustrate.
Anyways so what have they bought back to date? 20% or so? So by early 2015 expect 30% at or near current pricing with the targets outlined above.
Pull it out further and ASSUMING STABLE SHARE PRICE for the buyback and FLAT repurchases (there is room to ramp repurchases with ramping share price but doesn't seem needed yet).
2016 Jan could repurchase 40%. Top end $7 bottom end $4.67
2017 Jan could repurchase 50%. *IF* LMCA is looking to sell back then it comes in 2016 / 2017 I would think. Top $9 bottom $6.
2018 Jan could repurchase 60%. This is pivot area IMO. They start to build cash most likely. Top $12 bottom $8.
2019 Jan could repurchase 70%. Unlikely but two or three years at the end don't matter as much on repurchases. it is the repurchases TODAY and how much they offload early that affects down the road valuations. Top $17 bottom $11.33. And 2020 gets a $16 - $20+ target range.
Huge margin of error as it compounds as the years go out, and expectations are optimisitic but not unobtainable.
Dealing with a parabola here as I outlined at the beginning of the buyback. Still applies. If you go back to first year algebra and dig out linear appreciation vs. parabolic you'll see how time affects the parabola in comparison.
Do I expect it to hit $20 by 2020? Not reasonably. The price has to crack here at some point due to the buybacks so they will become less effective (not ineffective, just not as effective as buying at $3.33 when SIRI is actually worth more). At some point it will become near impossible to keep the EPS at 2/3 cents. IMO once that becomes difficult they let the cap off, talk the stock up, buy back only if / when the SP drops at the lower end of the range, and build cash in the meantime / pay off debt. Any cash LMCA needs sell back to SIRI or borrow with SIRI as collateral.
Let's say SIRI is able to buy back 30% at average $3.60 before this happens and over the next year the stock rockets and hits the high range of $7+ into 2017. That 30% they bought average of $3.60 for what, a couple billion shares? That investment rolls back in on the double and you just saved $7billion vs. if you tried to buyback today.
Again it's all fast and loose numbers but the BASIC idea is there. Takes time. Some probably don't want to wait and I don't blame them as you can flip into and out of hotter names and make 100% in months vs. watching paint dry and waiting in SIRI. The more of those that sell the faster this can go. Can always buy back in if you are confident in your timing and aren't trapped in something else a mistake may have been made on.
This also assumes LMCA doesn't merge in with SIRI... same basic idea applies if they do but some things could be a little bit different. Don't want to speculate on that unless it happens.
