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Maxim Group Lifts PT on Sirius XM (SIRI) $4.20; Focus on Free Cash Flow

February 5, 2013 3:35 PM EST Send to a Friend
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Price: $3.45 -0.29%

Rating Summary:
    13 Buy, 5 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 23 | Down: 25 | New: 18
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Maxim Group raised its price target on Buy-rated Sirius XM Radio (NASDAQ: SIRI) from $3.80 to $4.20 following fourth quarter results earlier. The price target comes as the analyst turns its focus to free cash flow per share and is based on 15x FY14 $0.28 FCF/share - post share buybacks.

Maxim analyst John Tinker notes SIRI free cash flow per share from 6.4 cents in 2010 to 10.7 cents in 2012 and forecast, with a $2B buyback of an estimated 600M shares, growing a further 40% to $0.15 per share in 2013.

"Liberty Media (NASDQ: LMCA) is no longer committed to tendering its SIRI stock suggesting increasing confidence in the growth prospects and desire to own more without paying," Tinker notes. "Investors can alternatively buy SIRI through LMCA at ~$2.75/share. Our assumptions are more aggressive than management and expect SIRI to buy back ~800M shares in FY13 and an additional 980M in FY14. We estimate FY13 FCF of $978M or $0.168/share (up 57% y/y) and FY14 FCF of $1.36B or $0.28/share (up 67% y/y). We are assuming leverage to increase to 3.1x net debt/adjusted EBITDA in FY13 and 4.0x in FY14."

The analyst said interim CEO Jim Meyers "came across well and focused on providing superior service in a connected car world - and thereby protecting SIRI's franchise."

For an analyst ratings summary and ratings history on Sirius XM Radio click here. For more ratings news on Sirius XM Radio click here.

Shares of Sirius XM Radio closed at $3.17 yesterday.




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