Pivotal Research Reiterates Buy Rating on Sirius XM Radio (SIRI)

Pivotal Research analyst Jeffrey Wlodarczak reiterated a Buy rating and $40.00 price target on Sirius XM Radio (NASDAQ: SIRI).

The analyst commented: "In the aftermath of the close of the Liberty SIRI-XM merger SIRI shares have had a remarkable plunge exacerbated by technicals around the close of the deal, a
“falling knife” stock chart, a lack of investor interest partly driven by the fact SIRI’s is not in any major indexes and broader concern around the outlook for the satellite radio business. Recall we had expected significant volatility post deal close, but in our view this is way overdone and has driven SIRI to valuation levels that are quite attractive. While the outlook for the business is admittedly choppy (and more reliant on price hikes amidst likely continued declines in subscribers) we remind investors of the significant free cash flow generating ability of the business, a core higher per capita income user base that is not going anywhere, declining satellite/core capex + price hikes should drive material growth in free cash flow even on modestly declining revenue CAGR. Importantly, even using relatively conservative forecasts, we believe the company is able to meet its de-leveraging goals (we assume the company retires a net ~$2.5B in debt by ’27 taking leverage down to the reasonable 3X EBITDA level) and be able to comfortably double the current dividend to a ~9% yield which would provide significant support for the stock. We also
remind investors that SIRI sits on 12.5MHz spectrum that they are clearing of customers through attrition (likely completed by ’29/’30) that based on past transactions (and assuming reasonably SIRI can get the FCC to let them convert it to terrestrial use) has an NPV ~$2.5B (which could arguably be low given the success wireless companies have had with fixed wireless access)."

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 $24.02 yesterday.

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