Sirius XM Analyst Round-up
The conference call of Sirius XM Radio is behind us, and analysts are beginning to weigh in with their respective thoughts on the first quarter as a merged satellite radio entity. Among those issuing reports today were Merrill Lynch, Goldman Sachs, Miller Tabak, and JP Morgan.
MERRILL LYNCH
Merrill analyst Jessica Reif Cohen noted that subscriber numbers were light, but that the subscriber issue was mitigated by cost reductions. On the subscriber front, Sirius XM’s gross sub number came in 130,000 short of Merrill estimates. Cohen said that the weaker number was not really a surprise given that the company had already guided down, and that OEM sales have been weak.
The analyst noted that self-pay churn was in line with Merill estimates, as was ARPU which came in at $10.47. On the positive side, Cohen noted that the EBITDA loss of $37mn (includes $27.5mn one-time programming), was $49mn better than MLe $86mn loss. Cohen attributes this to a demonstration by Sirius XM Radio that synergy benefits are real. Cohen stated, “Mel Karmazin, CEO of SIRI, has a history of successful merger integrations, and 3Q08 SIRI results provided some tangible evidence of synergy realization at SIRI.”
“Despite a slowdown in retail and OEM sales, SIRI saw cost savings on multiple items: 1) programming; 2) marketing; 3) work force; and 4) product development. Consequently, CY08 EBITDA loss guidance was lowered $50mn to $300mn.”
Cohen is maintaining a rating of UNDERPERFORM, but is encouraged by the “tangible evidence of cost rationalization at such an early juncture, however, we remain concerned over near term headwinds: 1) debt refinancing risk; 2) risk of further dilution if SIRI uses its equity to take out 2009 debt maturities; 3) potential risk to growth assumptions and guidance if the auto and retail channel outlook deteriorates more than anticipated.” The firm is maintaining their 25 cent price target.
GOLDMAN SACHS
Goldman analyst mark Wienkes issued a report today noting that, “subscriber metrics are missing and financials mixed vs. our estimates.” Wienkes report states that the company came in at mixed levels versus the Goldman analysis. Specifically:
- Gross subscribers came in at 1,847,000 versus Goldman’s 1,914,000
- Net subscribers came in at 344,000 versus Goldman’s 430,000
- All in churn came in at 2.7% versus Goldman’s 2.6%
- ARPU came in at $10.47 versus Goldman’s $10.82
- SAC came in at $74 versus Goldman’s $91
- Revenue came in at $612.7 million versus Goldman’s $609.8 million
- Loss Per Share came in at $(36.8)million, $(1.93) vs. Goldman’s $(105.1mn) and $(0.13).
Some initial questions Wienkes has are; (1)with just 200k net adds targeted in 4Q, how will the 2009 sub forecast be reached? (2)with 3.25bn shares at 3Q, an uncertain unissued allocation to other securities and + 262.9k recently issued shares in exchange for$90.7mn debt, set against an authorization cap of 4.5bn, what is plan B if shareholders vote “No”? (3)with $360mn of cash at 9/30, current assets (A/R, inventory, distributor receivables and prepaids) of $250mn and current liabilities (A/P, accrued expenses & accrued interest) of $874mn, will the working capital payback be deferred beyond the pending debt maturities?(4)what is the essence of the new $1.1bn “Deferred credit on executory contracts” and can it benefit the P&L in future periods? (5)do recently provided FCF targets imply satellite launch deferrals and what is the attendant risk? and (6)how will FCF/share estimates change following either more shares or higher interest costs owing to pending refinancings.
MILLER TABAK
Miller Tabak analyst David Joyce issued a report today regarding Sirius XM Radio’s Q3. Joyce notes, “Sirius XM Radio (SIRI) 3Q08 Revenue & Subs Beat, but 4Q08+ Subs Weaker than Expected. 5-Year Projections Miss on Subs, Revenue In-Line, OIBDA & FCF Above Estimates”
The analyst reiterate a NEUTRAL on SIRI with a short term target of $2, and a long term target of $3.
Joyce noted that Sirius XM Radio pro forma 3Q08 revenue of $613 mm(+16%) was just ahead of their $606 mm and the consensus $608 million. In addition, the Pro forma Adj. Loss from Operations (OIBDA) of $(37) mm was better than their $(74) mm estimate. The pro forma Net Loss of $(217) million matched the Miller Tabak estimate. EPS of $(0.09) matched consensus but was worse than their $(0.07)/sh on a share count average. Negative Free Cash Flow Of $(97.6) million beat their $(161) million estimate.
SIRI ended 3Q08 with 18.920 mm subs, having added a net +344k subs, above our +302k estimate that estimated an 18.87 million total. 1.847 million gross adds were greater than their 1.531 million estimate, but deactivated subs of (1.503) million were also greater than our (1.229) million estimate. Retail net adds were (149)k, worse than their +25k estimate, ending with 9.036 million subs (vs. their 9.144 million estimate). OEM net adds of +492k were far above the Miller Tabak estimate of +279k, finishing with 9.778 million (above their 9.560 million estimate). Rental net adds of 1.3k were below their +4k estimate. Churn of 1.7% was below their 2.2% estimate, ARPU was better than expected at $10.47 vs. their $10.09, and SAC was also better than expected at $74 vs. their $79 mm estimate.
“The company provided late last week, for financing presentation and reporting requirements, and again in the earnings press release, long-range projections that should be viewed positively, and could be a reason to consider SIRI a Speculative Buy, but we are reiterating our Neutral recommendation for now as >$900 mm of refinancings, which could cause further dilution, are on the horizon.”
JP MORGAN
JP Morgan Barton Crocket issued a report today relating to the Sirius XM Radio Q3 conference call. The analyst rates Sirius XM Radio as NEUTRAL. Crocket noted that Sirius XM reported an “exceptionally noisy, merger transitional 3Q08 that featured some core metrics that held up OK in the face of a tough macro environment.”
The analyst notes that while the quarter was encouraging, he believe the stock will continue to be driven more by progress toward refinancing $1b of debt due in 2009 than by fundamentals. Currently challenged credit markets provide reason for caution.
Among the concerns listed by Crocket was the OEM conversion rate of 47.0% pro forma, which is 3.7 points below where the company has been. His concern arises because a stable OEM conversion rates have been a strong argument for the long-term market opportunity.
Crocket also noted that Sirius XM exited the quarter with $360m of cash and equivalents, and expects to generate positive free cash flow in 4Q08. Importantly, the company anticipates no liquidity issues before the maturity of the Feb 09 converts. The JP Morgan estimates are under review.
Position: Long SIRI.
Joe the bagholder..
The comments on $2.00 a gallon gas was a conversation sometime ago between SoCalR and myself in regards to gas prices in Calfornia.
vaporgold
Vaporgold, I have no problem with your comments. However, I have been following what Brandon and Tyler have been writing for some time now and they continually step over the line with their distorted and misguided journalistic comments.
The “crazy” part for me began with the merger announcement. I clearly remember same at the end of 2006 thinking…you know what? I’m gonna sell Sirius. Then BAM! The rumor that they were going to merge suddenly became a reality.
Ok i thought. Mergers usually take a few months. I can wait.
LOL.
Then depression set in. The seemingly neverending schizo back and forth of HOPE and then NOPE! Constant speculation that the FCC and DOJ were about to approve….only for NOTHING to happen. Nothing that is except for the stock price continually dropping!
Then FINALLY a year ago today….I had HAD it. I had enough in the bank to absorb the loss I’d take if I sold. I was ABOUT to sell and then BAM! That bozo analyst started screaming that phrase that will live in Sirius infamy…MERGER IMMINENT! MERGER IMMINENT!
So what do I do? Yup. I didn’t sell. Not only that…I took the money I had in the bank and bought MORE shares. Thus began the second phase of the “insanity”….the “AVERAGING DOWN” phase.
LOL.
Little did I know that I’d be averaging down for another 8 months!
Then of course the pierre de resistance…..the MERGER is APPROVED!
But instead of celebration and jubilee for the longs….we find out Mel sold us out to the shorts….the very people who made our lives a living hell and taunted us for the ENTIRE merger process!
LOL.
So why am I so happy now?
Because I am no longer insane. I’ve let it go. For the FIRST time in years…I am actually SAVING money again. No LONGER tempted to throw ALL of it at Sirius…I am experiencing a new found FREEDOM.
Oh sure…I may throw $500 bucks at it one last time for fun.
But the days where I worshipped at the alter of the Sirius Stock…are OVER.
Yeah, it still hurts when I think about the time and money I spent on it. But now I am beginning to have hope again. Not for Sirius stock…but for life in general. I am no longer CONSUMED by Sirius or the money.
I look at Sirius now as a possible looooooong term lottery ticket. Even the money I put into it doesn’t feel like a death sentence anymore keeping me prisoner. Again because for the first time in over 2 years, I am saving money again. And THAT feels good.
Peace out fellow/former inmates at they asylum. 🙂
frigginregan Says: Then FINALLY a year ago today….I had HAD it. I had enough in the bank to absorb the loss I’d take if I sold. I was ABOUT to sell and then BAM! That bozo analyst started screaming that phrase that will live in Sirius infamy…MERGER IMMINENT! MERGER IMMINENT!
That analyst was guilty of making that false statement a number of times. They should have been prosecuted by the SEC and a hefty fine levied upon them to compensate shareholders for their loss. It was obvious they were doing it in an attempt to manipulate the stock price. Who they were holding it up for I don’t know, but it’s apparent they were protecting someone’s interest who wanted to make an orderly exit from the stock and minimize the pain of doing so.
Water under the bridge my friend. No sense in reliving the past. Especially for us Sirius shareholders. Our recent past is littered with MANY such frustrations. If we didn’t believe it before, there can be no doubt now….Sirius is the most manipulated stock on the planet. To try and figure it out would be as futile as banging your head against the wall.
Let it go man. Let it go.
We got Bushwhacked. All we can do now is wait it out. And of course cast our vote for the December 18th shareholder’s meeting.
Good Luck.
Joe….
You accuse me of going “over the line” and you make an insinuation that I am doing something similar to Henry Blodgett. I have no connection with Sirius XM. I do not make buy sell or hold recommendations to anyone at any time. I have no connection with Sirius XM. Your character assassination of me is “over the line”
You speak as if you know my finances and what positions I have made in SDARS. To be blunt, you know nothing of what I have in my account nor whether I have made or lost money in it. For you to chracterize me thius way is”over the line”
You lump me in with Brandon. Brandon has is own opinions and writes his own articles. I do not lump you in with others here…please extend the same courtesy to me.
You are saying that I go “over the line”. Please cite specific examples. Speaking in generalities accomplishes nothing. Speaking in generalities is the easy way. Be specific. Exactly what articles are “over the line”. Be specific please.
You say that I can not be impartial because I own the stock. I sold most of my position in 2004 BEFORE I began writting about Sirius and XM. What I hold today is a small part of my portfolio. I make my money in othe equities. Would I like the stock to go up? sure. Will it change my lifestyle if it does? Not really. My writing and opinions would be the same eregarless of whether I have 10 shares or 1,000,000 shares.
You say that I do not provide “The information people need to know”. I provide what is available. I have been slammed by cheerleaders for posting about Goldman, Cramer, Merrill, etc. I do not filter the reports from analysts. I simply put out what is being said.
People have been upset with me because I took the stance that there would not be a significant run up when the merger was approved. People have been critical of me because I have stated that the debt issue gives a ceiling on potential. People have been critical because i put on Michal Hartlieb.
You speak of getting brid of the board, but give no proposed solution. Again, it is general terms that accomplish nothing. If you got what you want, and the BOD and Karmazin were canned tomorrow, what would the solution be? Who do you think should run the company.
I have been vocal about the reverse split and proposed dilution. I have said that people should weigh all aspects of the issue. I have said people do not need to run out and vote the proxy until they can digest more information.
I can handle being criticised, but would appreciate you being specific. These generalizations accomplish nothing. Exactly what articles did you feel were over the line.
REGARDING OIL
Speculatoors were only part of the equation. OPEC sits on 75% of the world supply. 35 years ago they pumped 27 million barrels a day. Today, while demand has increased substantially, they only pump out 32 million barrells. Last year they added two nations to OPEC. Those nations were responsible for 5 million barrels a day. Did OPEC production go up to 37 million? No. It remained at 32 million, and 5 million brrels a day were removed from the world markets.
Opec controls the supply side of the equation. This control gives speculators power to manipulatethe price, but it would not happen without OPEC’s actions. Just this week OPEC is speaking of cutting production again.
Vapor.
You are on the absolute .01 edge.
Vapor.
Dow is suppose to retest it’s lows tomorrow. Last day for redemptions.
Maybe you should be day trading this stock??
How is holding .25?
Socal
Hey Vapor. Are you M. Weinkes???? LOL.
Correction. Last day for redemptions…Fryday.
This piece of shit stock can’t even gain a penny a day…stuck on.25 last 2 days even with the somewhat good news from CC.
it was up a 1/2 a penny before last trade of 1,310,779 that sunk it to unch.
Hope. Market traded a very light 980 million shares.
Buyers have left the building. Hopefully they will return next week.
imho
SOCAL…
why would someone pay .30 after hours for this many shares? When they could have bought at .25 all day?
After Hours
Time (ET) After Hours
Price After Hours
Share Volume
16:23 $ .2537 2,000
16:17 $ .30 1,113,598
16:16 $ .25 2,496
16:14 $ .252 200
16:14 $ .251 2,300
16:13 $ .252 200
16:13 $ .252 200
Tyler, you did a fine job of defending yourself against unqualified and uncalled for attacks made by Joe the (pompous, opinionated, typically voluble) Bloviator. But there was no need. Those of us that regularly read your articles (and Brandon’s) may find occasional reasons to disagree; however, you appear to try your best by keeping us informed on matters pertaining to SIRI and Sirius XM. Keep up the great work.
Long SIRI. Short Joe the Pseudo Bard’s Trashing of Two Valuable Constributors on SiriusBuzz
Webmaster, the timestamp on my post above appears wrong. I made the post just a moment ago and, in the Central Time zone where I am it is 6:15 p.m.
SiriusHope, maybe the .30 AH buy was a result of a mistake? One time I entered a stop order by mistake rather than the limit order I intended and paid more. Ooops, I’ve been keeping that secret to avoid embarrassment. Oh well, Sh*t happens….
PM. You are too funny.
Socalrun…
I think the stock is just wore out and said screw it. I am going to sit at .25 and you traders can go play with yourselves.
By the length of time of not closing below .25 shows some indication of a bottom perception.
I also think big investors are watching what you indicated earlier that now has happened with regards to GM and Ford (good call)
GM and Ford are moving to the front of the pack with the Congress.Very possible the loans will be in place before Bush leaves office.Be great if that was accomplished in the 4th quarter.
That along with some of the deals by the automakers might be enough to get buyers back in the showrooms.This could have an impact in the first quarter units sold.
Investors are waiting and I think the stock is also.
imho
vaporgold