What Are Sirius XM Shares Really Worth? 88 comments
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By Brandon Matthews
On any given day, there are dozens of professional stock “bashers” trolling the stock message boards and posting erroneous information on Sirius XM Radio (SIRI). Perhaps that is where Jim Cramer, CNBC and the multitude of biased financial media get their information, so with that in mind I set out to dispel some of the myths surrounding the company, by explaining the reality of things like revenue, debt and EBITDA growth.
Our first myth involves Sirius XM debt and the battle cry of the ignorant that it is somehow excessive. As the chart I’ve embedded below indicates, Sirius XM debt stands at $3.89 billion. Compare that figure to Viacom (VIA.B) at $7.37 billon, Comcast (CMCSA) at $33.04 billion, Dish Network (DISH) at $5.13 billion, Time Warner Cable (TWC) at $22.93 billion, British Sky Broadcasting (BSY) at $4.46 billion or even DirecTV (DTV) at $5.79 billion and clearly Sirius XM Radio debt is anything but excessive. [click to enlarge]
How many times have we heard the argument that Sirius XM Radio has too many shares outstanding? First of all, there is no such thing. A company’s value is not measured in outstanding shares but rather its market cap. Once a company achieves positive free cash flow and sufficient earnings, shares can be repurchased, and Sirius XM Radio has many years ahead of it in which to implement such a plan. There are some who question the potential market cap of Sirius XM Radio. The problem is that Sirius XM Radio suffers from an identity crisis. One analyst may value the company based on media stocks, while another labels the equity consumer discretionary, while still others like myself look at the company as a subscription service like cable operators.
Sirius XM Radio has a current market cap of $2.69 billion dollars, and commanded a combined market cap of as much as 6 billion dollars just one year ago. Compare that figure to Viacom with a $15.27 billion market cap, Comcast with $45.08 billion and DirecTV with $24.37 billion, and clearly there remains plenty of upside potential to SIRI shares.
Based on current valuations, Sirius XM is being lumped with companies such as Clear Channel (CCO) which commands a market cap of $2.5 billion as it faces the potential of bankruptcy in the not too distant future, and which derives almost all of its revenue from advertising. It is for this reason that Sirius XM Radio shares remain undervalued and explains why some retain their negative outlook on the stock. Sirius XM Radio would be fairly valued today at $1.30 – $1.50 per share based on its debt management and increased year end EBITDA projections.
What about Sirius XM’s future potential? Of all the stocks mentioned above, I would like to direct your attention to revenue growth. Sirius XM’s revenue growth stands at 108%, dwarfing all of the competition, and analysts expect revenue to continue to grow over 60% in 2010. As my friend “Muscle13″ points out, it’s all about EBITDA growth. It is also the one metric that critics can point to in justification of their negative bias. Even with increased EBITDA guidance, Sirius XM still falls short of having earned a higher market cap than the 6 billion it should currently be valued at. As the chart shows, the market cap values of the other company’s mentioned far surpass that of Sirius XM based on EBITDA. That is changing to the positive however, as Standard & Poor's research points out in their research report:
(Sirius XM) Management recently issued post-merger financial targets for the next five years, with 2009 subscriber growth of 20.6 million reaching 28.4 million by 2013, revenue of $2.7 billion to $4.1 billion, adjusted EBITDA of over $300 million to $1.5 billion, and free cash flow of breakeven to $1.4 billion.
Sirius XM management had provided 5 year guidance which offers the potential of Sirius XM shares rising to as much as $7.50 in the next 5 years, as long as management can deliver. Those projections put EBITDA at 5 times its current level. Simple math tells us that $1.50 x 5 = $7.50. That’s not a bad 5 year potential return on a .65 – .70 investment and certainly a justifiable long term price target that leaves out any outrageous multiples that a sector monopoly might warrant in the future.
There is one more myth that is beginning to make its way around the web. That is a claim that Sirius XM will soon receive a delisting notice. That is false. They will soon receive a letter of non-compliance and have at least a full year to regain compliance.
Position: Long SIRI
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The UserID’s bashing me for telling the truth also know the truth. They already know the delisting warning letter is on the way. They already know the plan for a rev-split is written in stone.
For 2 years SIRI has paid advertisers to mislead people with blogs posted here. They know the doom that is coming. They are just spreading more lies to keep the sp as high as possible before the bad news hits. They will say and twist anything in favor of SIRI.
This makes me very sad that such crooked people exist and are so active.
Real stock traders comment here everyday that the paid bloggers have no credibility.
The simple time line is :
SIRI will have 180 days to trade and close 1.00. Under noncompliant rule SIRI must trade closing 1.00 for ten days back to back (10 days consecutive).
After 180 days SIRI can request a hearing. SIRI could get more time.
But the time line is mute. Mel's plan is to get it over quick with a rev-split. Listen to his words in the Q2 report...
On Sep 01 04:53 PM petra wrote:
> I got a question about the delisting letter. Some of you mentioned
> the company would have 1 year to deal with this issue in order to
> avoid the delisting. I thought they would only have 6 month to address
> it.
> Am I wrong ?
But it can not happen under current music royalty contracts. SIRI USA is totally blocked out of international sales.
Blame the music industry and crooked judges for making Internet radio and SIRI pay royalty fees while normal radio pays none... It sucks...
Before the argument - Sales and access are two different things. SIRI can only bill services for users at a USA or Canada address.
On Sep 01 05:11 PM between the hedges wrote:
> Mel: Time to get an aggressive international sales plan. Lets get
> this going. Publish it.
You would need to trade Asia stock to get in on it.
Truly, SIRI China would pay SIRI USA royalty for programming.
The long way around current music royalty contracts that suck…
On Sep 01 04:42 PM petra wrote:
> connorport, the only problem with China is, 1.1 bil. or more than
> 85 % of the Chinese make less than 2.000 $ a year and the better
> part of the rest makes 10.000 or less, that leaves a relatively small
> number of potential subs. But you don't have to go that far east,
> as a German-American I live on both sides of the pond and now I can
> enjoy Sirius overseas, so can my brother in law who lives in Germany
> for 30 years now as well as many others, most of them in the army.
> It might not a huge number, but it's a start and what's important
> money is not an issue.
> BTW, a few weeks ago I wrote an article on SA in German to German
> investors and recommended an investment in Sirius. At that time shares
> traded in Frankfurt for .35 Euro and believe it or not but everybody
> who got in has no reason to complain.
What about Apple? Do they need to form a different company? NO! Earnings come here.
On Sep 01 05:39 PM SIRI-Doom wrote:
> SIRI China would need to be a totally new company separate from SIRI
> USA.
>
> You would need to trade Asia stock to get in on it.
>
> Truly, SIRI China would pay SIRI USA royalty for programming.
>
> The long way around current music royalty contracts that suck…
Unbelievable.
And one more thing: For those who missed my earlier post, scroll back. A game is on the board and we need more players to click in with their opinion.
Scot's Slant.
I am here to tell the story of corruption of Mel KarmaCrook and SIRI stock.
I am here to stop the SIRI advertisers from misleading people for profit.
You would have people buy SIRI at this very wrong time just to pump it up before the fall from the NasDq delisting letter. You would trap them into buying at this high sp and then see them get frustrated by the rev-split. You know this is all going to happen but you lie endlessly.
You just motivate me more…
People will know you are a SIRI crook and a creep after September 12.
China pay a royalty fee? Are you kidding?
Mr. Stupid
On Sep 01 05:39 PM SIRI-Doom wrote:
> SIRI China would need to be a totally new company separate from SIRI
> USA.
>
> You would need to trade Asia stock to get in on it.
>
> Truly, SIRI China would pay SIRI USA royalty for programming.
>
> The long way around current music royalty contracts that suck…
ANYONE who claims this, NEVER listen to them. No one takes time to bash a stock they dont own. No one. Zero. None. Not one person in the entire universe would do such a crazy thing with no agenda.
Your comments are useless, and your attacks hilarious. Go stick it, and sit on something sharp. Good boy. I hear your mother calling, time to turn off the basement light, and head to bed little guy. Big day tomorrow bashing another good company on the rise. Have to pay the bills somehow....
1000 percent... Wow, sirius pumpers are GENIUS'S!! Everyone should talk to one today
On Sep 01 01:48 PM BigVinnie wrote:
> LOL.Right, that's why EBITDA guidance has been raised from quarter
> to quarter and there proving even with subscriber losses they can
> continue to raise this guidance.
> your assertions are hypocritical to a real world situation. You need
> to do your home work. This time next year the company is going to
> be cash flow positive. Sirius XM management has maintained an extremely
> aggressive approach to maintaining its subscriber acquisitions and
> improving this guidance by diminishing operating expenses.
> The company as of the last 2 quarters has been pretty on PAR with
> everything they have claimed for its guidance.
When the merger took effect in late 2008 it set the company back in EBITDA because XM's debt load was almost double what sirius's load was. Theres also a period known as restructuring, which also sets back costs, and in the begining most restructuring cost more money in order to establish structure. 2007 was all about fighting the acquisition costs, which if the FCC didn't stall the merger from happening at the end of 2007 for so long than Mel's EBITDA guidance would of been very close to accurate.
Your calling a man a liar because his guidance was based on the merger that should of happened ealier as a calculation. Since the merger didn't happen until a year later the debt load from XM had continued to grow from that point in time, lowering EBITDA by the time sirius acquired XM.
Believe me dude you will be surprised by the performance of this company in the 3rd quarter.
On Sep 02 09:23 AM CurrentAsset67 wrote:
> Mel Karmazin was pumping EBITDA positive by 2006 years ago. What
> leads you to believe he's right now?
too bad when you add in the "I" (running at ~$400mil/yr) you're way in the red.
this company has never made money. ever. $3.8bil in debt is far too much. the common stock is done.