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Sirius XM (NASDAQ:SIRI) is getting ready to announce Q1 earnings on Tuesday, April 30, 2013 prior to the market opening. The satellite radio provider is in a strong position, and thanks to good auto sales, should be able to announce some good numbers across the board. One problem that the equity has is that these good numbers are not only expected, but pretty much baked into the current price of the stock.

Sirius XM likely has little to offer in way of a surprise. That fact alone limits the upside potential of the stock. Instead of reaching up toward $3.50, we could simply see a day where the height of the conference call pop is in the neighborhood of $3.25 or so.

To be clear, the long term prospects of Sirius XM give plenty of reason to expect $3.75 to $4.00 during the course of the year, but the big question is when we can expect to see that happen. Personally, I am not looking for a catalyst in the Q1 numbers. Investors may need to wait a month or two more before that catalyst reveals itself.

There is a $2 billion share buyback on the table, but as yet it appears that the company has not been very active in buying up shares. With Liberty Media (NASDAQ:LMCA) in control, there are potential reasons why we may not see active buybacks with any real volume until at least June or July. One key component is the participation of Liberty in these buybacks. If Liberty is ready to jump on board the buybacks could get more aggressive with new announcements coming that will increase the size and scope of the buyback program.

For Q1 the analyst expectations are all in and it appears that there will be no big surprises in store:

  • Analysts are expecting 3 cents per share for an EPS. This assumption is reasonable and the company should be right in that neighborhood.
  • Analysts are expecting revenue of $905 million. This again is likely in the right neighborhood. A real surprise would be revenue of $920 million, but I see no real way that the company could increase revenue on that level. Look for the company to be right in the ballpark.

I am looking for subscribers to be in the area of about 450,000 to 475,000. A good performance, but not enough to have the company moving estimates by any material amount. Currently the company has NET subscriber additions for 2013 at 1.4 million. With the GM deal shifting to unpaid promotional in Q4 of this year, I am looking for the company to get another quarter under its belt before considering an adjustment here.

Free cash flow and EBITDA will be the big numbers to watch for. The company has outlined 2013 goals of $1.1 billion and $900 million, respectively. In my opinion Q1 numbers will point to these figures being attainable. No real surprises here either.

What investors need to watch for is the volume on which the equity moves. Lately, volume has been much lighter than normal. Average volume for this equity is about 65 million shares. Over the past 50 days the average has been 44 million, while the last 20 days has seen volume at an anemic 36 million. In my opinion the play is watching to see a move on volume of over 70 million shares and monitoring to see if that volume backs off. If it does, we are looking at a crest, and likely the equity will settle down again. The baseline we have to work with is about $3.15. If there is a fast spike, even to $3.30, but the volume is not heavy, then the eventual build to $3.50 and beyond will take time.

Stay tuned and keep a close eye on volume. Do not expect surprises, but be ready just in case the company is able to pull a rabbit out of the hat. The macro-economic situation will impact the speed at which moves in this equity happen.

Source: Sirius XM Q1 Call - What We Need To See