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Q110 Preview: SIRIUS XM (SIRI) Looks to "SIRIUS"-ly Add Value for Investors

May 3, 2010 2:08 PM EDT
Shares of Sirius XM Radio (Nasdaq: SIRI) are trading higher ahead of the company's first quarter earnings release, expected before the market opens on Tuesday, May 4, 2010. The stock is up 4.03% to $1.23 in early afternoon trading.

The company is expected to report break-even EPS on revs of $671.32 million. Last quarter, the company posted break-even EPS as well, on revs of $683.8 million. One year ago, for Q109, the company had a loss of $0.07, wider than views, on revs of $605.5 million, about 6.33% off. The company is actually expected to report break even EPS for the duration of 2010, according to consensus estimates.

The stock has gained about 43% for the quarter. 2009 saw the stock make some impressive moves, closing up 500% to $0.60 on December 31, 2009. Shares are currently up 2320% from lows of $0.05 in early February, 2009.

SIRI is trading for an enterprise value-to-EBITDA of 12.74. For comparison, Cumulus Media Inc. (Nasdaq: CMLS) is at 12.08, Entercom Communications Corp. (NYSE: ETM) is 13.47, and Westwood One Inc. (Nasdaq: WWON) is at 89.76.

Data from Bloomberg shows that 5 analysts have a Buy rating on the shares, 4 have a Hold, and none rate them at Sell. The analyst average price target is $1.18, with a high of $1.35, and a low of $0.75.

News Through the Quarter
SIRIUS XM rolled-out a new campaign to be offered on certified pre-owned Ford and Lincoln-Mercury cars for a three-month trial period.

In mid-February, the company traded above $1 for the first time since September 2008.

Analyst Ratings Through the Quarter
In late-January, Lazard initiated coverage on SIRI with a buy rating and $1 price target.

S&P then upgraded their credit rating on SIRI to 'B' with a Positive Outlook.

Early March saw Wunderlich Securities has downgrade the stock from Buy to Hold, while maintaining its $1 price target.

Finally, BGB started coverage on SIRI with a Buy rating.

Summary
The company noted that they added 171,411 net subs for Q110, compared to (404,422) in net subs for Q109. Self-pay churn also reduced down to 2.0% from 2.2% for Q109. Conversions from trial to subscription from the sale of a vehicle improved 1.3% to 45.2% for the quarter. SIRI added that it ended Q1 2010, with 18,944,199 subscribers, an increase of 344,765 over the year-ago quarter.

Sirius should be putting up good numbers for the first quarter, riding the coattails of an improving economic environment which is bolstering auto sales [Sirius' bread-and-butter market]. Look for an increase in free cash flow of about $100 million, as the company expects to report a FY10 of around $500 million.

So while headlines of a "profit" in the quarter will likely bring new money flowing into the stock, will investors that have driven the stock higher through-out the quarter "sell the news"?

SIRIUS XM Radio Inc. is expected to release their Q110 earnings on Tuesday, May 4, 2010, at approximately 8:00am EDT. Stay tuned to StreetInsider.com's Earnings section to see our analysis of the highly-anticipated quarterly results within seconds of their release.

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