Goldman Sachs Starts Sirius XM Radio (SIRI) at Buy, Sees Another 20% Upside

December 18, 2012 7:11 AM EST 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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Goldman Sachs initiates coverage on Sirius XM Radio (NASDAQ: SIRI) with a Buy rating and $3.50 price target, suggesting 20% upside. The firm said free cash flow, shareholder returns will drive upside.

"We believe Sirius XM offers investors a mix of robust growth along with accelerating profitability and free cash flow that exceeds peers," the analyst comments. "Despite its performance year to date (+59% vs. S&P 500 +13%), we see incremental upside to the stock via greater than expected growth in free cash flow (FCF) and FCF/share estimates. We expect SIRI to utilize FCF and an under-levered balance sheet (in accommodative fixed income markets) to aggressively repurchase shares, shrinking share count by 20% through 2015E and 45% over the next ten years."

Goldman forecast three-year free cash flow CAGR (2013-2016) for Sirius XM of 17% and FCF/share CAGR of roughly 30%. They see the company benefiting from multiple tailwinds, including: (1) an auto market recovery; (2) margin benefits from greater scale and operating leverage; and (3) moderating capex in the absence of additional satellite launch spend post 2013 (through late 2016), and (4) incremental interest expense savings from additional debt refinancing.

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 $2.92 yesterday.


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