UPDATE: Barclays Upgrades Sirius XM Radio (SIRI) to Overweight; Analyst Says Sell-Off Doesn't 'Add Up'

March 26, 2014 6:35 AM EDT Send to a Friend
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Price: $3.37 --0%

Rating Summary:
    13 Buy, 5 Hold, 1 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 24 | Down: 28 | New: 14
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(Updated - March 26, 2014 1:17 PM EDT)

Barclays upgraded Sirius XM Radio (NASDAQ: SIRI) from Equalweight to Overweight with a price target of $4.00 (unchanged). Analyst Kannan Venkateshwar said the rationale for the resent sell-off "doesn't add up."

"Over the last six months, SIRI equity has underperformed the market by more than 20%. Based on our conversations with investors, this could be driven by: (1) concerns around subscriber growth on the back of trends over the last few quarters and SIRI's guidance and auto sales YTD; (2) concerns on the impact of GM's auto recalls; and (3) news on the competitive impact of Apple launching a streaming music service. In our opinion, apart from the subscriber trends, none of the other reasons should have any material relevance. On the subscriber growth front, while the concern is valid, even reducing estimates to the same level as guidance as we did earlier in the year does not alter the free cash flow story in Sirius," said Venkateshwar.

"In our opinion, SIRI is likely to be increasingly viewed as a capital return story rather than a growth story. Despite the slowdown in subscriber growth, we forecast FCF to grow at ~18% on an absolute basis and ~26% on a per share basis (2013-2016 CAGR), driven largely by the company's operating leverage. This is one of the highest growth profiles across other content or distribution companies, most of which are focused on capital returns. In our opinion, this sets up SIRI to buy back at least 10% of its outstanding shares annually for the next few years," he added.

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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