October 17, 2007, 11:13 am
Satellite Radio: Cowen Says 70%-Plus Chance Deal Closes
Posted by Eric Savitz
In a brief note previewing the upcoming earnings announcements for XM Satellite Radio (XMSR) and Sirius Satellite Radio (SIRI), Cowen analyst Tom Watts asserts that there is a “70%-plus chance” that the proposed merger of the two companies wins government approval.

Watts says a Department of Justice decision on the deal should come “relatively soon,” with the two companies in full compliance with the DoJ’s information requests. He says a ruling from the FCC should follow soon after.

Watts has Outperform ratings on both stocks, “even without M&A potential.” He thinks both companies can beat the market on free cash flow potential alone. He thinks both companies low-balled subscriber growth estimates for 2007, “setting the stage for out-performance in the second half.” If you have to pick just one, Watts prefers XM, based on stronger OEM relationships with automakers, and a better relative valuation.

XM reports earnings on October 25; Sirius on October 30.

XM today is off 9 cents at $15.29; Sirius is up a penny at $3.61.