Sirius XM Bulls Anticipate Positive Q3 Results 35 comments
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By Steve Garcia, Cos1000
So many have asked about SIRIUS XM’s (SIRI) stock price reaching the dollar mark, that I felt compelled to put the words of one of the most intelligent members of the Satwaves community, COS1000, together with my own and provide a look at the possibilities. We have some minor disagreement as to price action going into the conference call (CC) which is still weeks away, but other than that, the man’s words are filled with facts and eloquently put together. In my mind, $1 before the CC is a bit optimistic, but achievable, with a fade down to .80s support quickly after it touches. COS1000’s opinion is for a slightly lower high. I can’t say that is not a more balanced approach than my own opinion, which is partly based on the psychology of anguish the Wall Street know-it-alls seem to enjoy with respect to SIRIUS XM shareholders.
Without any news prior to the 3Q CC, we go sideways - ever more slightly upward as auto news has been validated as positive in the media already - which will help when the CC actually takes place and the numbers are revealed for SIRI. Merrill Lynch’s Jessica Reif Cohen coming out with a positive outlook and analysis would be nice but not likely until the stock trades above a dollar. The burning question is how high the stock runs into the CC and whether or not SIRI will hold on good results. In the interim, shareholders are forced to deal with the same preconceived biases and short side analysis from those looking to help hedge funds and other short interest positions. The rehashing of old news and simply making up news like a recent bankruptcy poll has raised its ugly head yet again, with the same cast of bashers like thestreet.com disseminating falsehoods and half-truths repeatedly as fact.
The usual SIRI bashers are also running lip service that a reverse split is imminent and unavoidable, when in fact, there is more than enough time to see the stock price rise above one dollar and never look back. That would certainly put off any short term thoughts of a reverse split. By the way, has the street.com submitted its overdue filings to the SEC yet? I believe they are in danger of being delisted and going bankrupt in my analysis of their balance sheet. They also seem to be pulling out all stops in an attempt to save themselves by desperately begging for subscribers at steep discounts to current subscriber rates.
Looking at the Q2 pro forma results to get baseline data in anticipation for Q3, what jumps out is how small the retail subscriber loss actually had been through June. With new revenue streams available such as the iPhone app and skydock offering, along with other new offerings, we should expect the company to reverse this recent trend in the last two quarters but possibly not in time for the Q3 report. A continuation of strong updates in the CC by Mel Karmazin as he did masterfully in the last CC could help to alleviate any negative in the numbers for Q3 and bring excited anticipation for the fourth quarter, as well as help support a higher stock price, keeping the trend over the first 2 quarters intact.
The most encouraging sign is that even with all of the economic negatives, revenue increased year over year (YOY) and SIRIUS XM was cash flow positive from operations. Additionally, adjusted Inc/Loss from operations went from a loss of $234M for the first 6 months of 2008, to an adjusted income gain of $241M for the first six months of 2009. This is a swing from negative to positive adjusted income from operations of $475M during the worst economic downturn in recent history. That is incredible operating performance, and an excellent example of why these two companies had to merge to survive and the resulting synergies they provide to improve performance of the equity and the balance sheet.
Not to say things are perfect, as I feel the balance sheet is still needing a reduction of leverage, but the company has said and done all the right things this fiscal year to earn the right to survive, and if it continues along the same path, the right to thrive! Given a positive subscriber number as recently reported by the media regarding autos, what should we anticipate the impact to be on revenue, operating adjusted gains, and free cash flow? Much will depend on the contracts with the OEMs in determining how positive the numbers will actually be. The big unknown this quarter was the Certified Pre Owned car market, which was rolled out fully this quarter. Carmax (KMX) is forecasting good news; these numbers could more than offset any drop in new car sales in September. The CPO market has not been reported by the company as a separate bucket at this point and as far as we know, it will not be.
Another unknown will be the impact on revenue from three different events:
- The iPhone app requiring a 2.99 charge for Premium Internet Service to existing subscribers and a 12.95 charge to new subscribers.
- The additional charge for royalty fees that went into effect on August 31, 2009.
- $2 increase in additional subs that went into effect in March, 2009.
One thing remains abundantly clear when looking at the fundamentals of this company. Revenue will continue to be up and the numbers will beat the 2nd quarter gains that we have already witnessed. The question regarding profit is whether or not SIRIUS XM will be hit with more one time debt restructuring costs. One thing we do know is that there were no early termination fees in connection with the payoff of their loans from February. We also don’t know whether new accounting standards will allow revenue to be assigned to the added hardware expense that will be incurred during the retail and OEM production ramp up. The fundamentals of the company continue to show marked improvement, which is what will eventually make all investors happy, regardless of the day to day follies we see regarding the stock price. Best to ignore the Motley Fools and street.coms of the world.
Position: Long SIRI
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Seeking Alpha's analysis:
Mr. Amobi was one of the first analysts to go out on a limb and forecast a price increase from .34 to .50, which SIRI shares were able to reach months prior to Mr. Amobi’s 12 month prediction. With the industry’s foremost media analyst now predicting a $1.00 share price, Sirius XM Radio investors can perhaps breathe a little easier.
On Oct 05 05:36 PM SIRI-Doom wrote:
> LOL so much for the lighter side.
> It was only a funny... Lighten up guys...
On Oct 05 05:49 PM SIRI-Doom wrote:
> You bring up Mel's option stock. Good point
>
> Will Mel collect that contract before the rev-split? Or will he rev-split
> reducing current stock holder shares and then collect his million
> shares.
>
> Oh, I checked and confirmed that no split will affect his stock options
> contract until it is executed. Bet he will get his full shares after
> the rev-split...
Your good commentators.
You're spelling is improving.
Do you really think the sophisticated institituional investors in Sirius XM - John Malone, Vanguard, Oppenheimer Funds, Fidelity, Gabelli, Prudential, Putnam, Wellington, etc. - would permit outstanding option grants to remain unchanged in terms of share numbers if a reverse split would materially alter the value of such shares? How naive does SIRI-Doom think we all are??!!
One more case of SIRI-Doom going off the deep end without a life preserver!
On Oct 05 05:49 PM SIRI-Doom wrote:
> You bring up Mel's option stock. Good point
>
> Will Mel collect that contract before the rev-split? Or will he rev-split
> reducing current stock holder shares and then collect his million
> shares.
>
> Oh, I checked and confirmed that no split will affect his stock options
> contract until it is executed. Bet he will get his full shares after
> the rev-split...
But, I see your point about 30 cents. I think the intrinsic value is up now from 38 cents to 44 cents. However, intinsic value has little to do with hype of daily trading and trends. Speaking as a day trader, iit is all a gamble...
On Oct 05 10:51 PM supermankind wrote:
> do you guys actually discuss the possibility of a stock going from
> 50 cents to 70 and the oh gosh maybe above 80 and then possibility
> of over a $1 this desperado has been trumpetin g this stock for way
> too long-- i stopped buying the hype of siri back 6 months ago- i
> buy stocks like hgsi that go from .50 to $22 i buy sppi .65 to 10.00
> i dabble in 50000 shares of biel at .001 and go to .12 --so wow siri
> went from .04 to .70 YEAH IN A YEAR! GUYS DUMP THE STOCK --THAT IS
> UNLESS YOU ACTUALLY HAVE BOUGHT IT ABOVE .50 and are waiting for
> some type of worthwhile gains.. honestly it was interesting at .04
> it's just a pig at anything north of .30!! please keep in mind it
> really should be bankrupt. oh by the way picked up PIR at .15 went
> to 3.50 in LESS TIME THAN SIRI HAS TAKEN TO GET TO .80(NOW IT'S BACK
> IN THE .60'S) SAD!!!!!!!!
On Oct 06 12:44 AM dbrown wrote:
> supermankind: your plethora of lottery pics has fared well, but any
> trader planning on staying in the business quickly realizes that
> going for yields like that on a consistent basis is the absolute
> quickest way to broke. The most wealthy traders play the small moves
> (wonder why that would be). Trying to play 800% gains is a pipe dream
> of a novice.
Lower prices would increase the number of subscribers,
dramatically. Instead, "they" are doing the opposite.
Raising prices will likely lower revenues as subscribers stop
subscribing, and switch to playing their favourite CDs instead.
I suspect the demand curve Sirius XM (or is it XM Sirius?) is
facing, is highly demand price elastic.
made by females (according to "women's post"), you
would think that Sirius would offer a radio station featuring
only female artists. But such a radio station is conspicuously
asbsent. As well, there is no real conservative voice on
Sirius radio: Where is the equivalent of Rush Limbaugh,
or William F. Buckley Jr.? I think Sirius would have picked
up more subscribers if "they" had signed up Rush Limbaugh
instead of Howard Stern. But, that is just a guess. Changing
content, is another way of increasing revenues (gaining
subscribers), or losing revenue. Given that media content
is politically PERSUASIVE, the profit motive might be in
conflict with the goal of obtaining mindshare, if indeed promoting
an ideological agenda be the intent of this media company, as
newspapers have been charged with doing. But maybe that is
just paranoia, for nobody has to eat (accept) what is put before
them. It is the lack of options that upset individuals, rather than
the food itself. Remember this?: "cheeseburger, cheeseburger,
pepsi....no coke". That was from a skit on SNL starring John
Belushi and Dan Ackroyd as two immigrants running a restaurant
with a limited selection of items.
On Oct 06 02:55 PM misther wrote:
> With a rumored 85% of all consumer purchases being
> made by females (according to "women's post"), you
> would think that Sirius would offer a radio station featuring
> only female artists. But such a radio station is conspicuously<br/&g...
> As well, there is no real conservative voice on
> Sirius radio: Where is the equivalent of Rush Limbaugh,
> or William F. Buckley Jr.? I think Sirius would have picked
> up more subscribers if "they" had signed up Rush Limbaugh
> instead of Howard Stern. But, that is just a guess. Changing
> content, is another way of increasing revenues (gaining
> subscribers), or losing revenue. Given that media content
> is politically PERSUASIVE, the profit motive might be in
> conflict with the goal of obtaining mindshare, if indeed promoting
>
> an ideological agenda be the intent of this media company, as
> newspapers have been charged with doing. But maybe that is
> just paranoia, for nobody has to eat (accept) what is put before
>
> them. It is the lack of options that upset individuals, rather than
>
> the food itself. Remember this?: "cheeseburger, cheeseburger,
> pepsi....no coke". That was from a skit on SNL starring John
> Belushi and Dan Ackroyd as two immigrants running a restaurant<br/>with
> a limited selection of items.
On Oct 06 04:01 PM JamesPS wrote:
> Have you heard on the Cosmo Channel, Martha Stewart, or Oprah? In
> terms of convervative talk, it doesn't get any more right than Fox
> New and Fox News Talk, or Patriot Channel.
-------------
Sirius XM Executives Intend to Sell Shares
The Wall Street Journal
Granted millions of company shares in May, five top executives at Sirius XM Radio Inc. disclosed their intention to sell them all upon vesting. So far, they have sold seven million shares for nearly $3.2 million.
The last time an insider at the company made a purchase larger than a few hundred dollars was in August 2008, when Sirius XM Chief Executive Mel Karmazin bought two million shares shortly after the merger of Sirius Satellite Radio Inc. and XM Satellite Radio ...
online.wsj.com/article...
maybe this is a stupid question but when they added the new satellite did that add more debt or was it already factored in. i cant imagine that those things are cheap.
All of the insider sells this year are due to stock options instead of bonuses. They have all been preplanned! Nothing new here! Do not believe anything that siri-stupid says...Wall St article...old news!!