By Brandon Matthews
Wunderlich Securities Equity Analyst, Matthew Harrigan, issued an updated report Wednesday morning on Sirius XM Radio (Nasdaq: SIRI) on the heels of the auto results issued Tuesday. As in his previous report, Harrigan remains extremely bullish on Sirius XM’s long term business model. In the report, Harrigan maintains his Hold opinion and $1.00 near term price target on near term economic concerns, yet suggests longer term price targets of $1.85 and $3.50 respectively as auto sales increase. Harrigan writes:
“SIRIUS can be objectively valued. SIRI is now a company with 18.77 mm subs and $550+ mm in 2010E EBITDA. It can be readily valued on a DCF basis using our S&P 500 linked cost of equity approach. Uncertainty in forward operating results can be captured by looking at U.S. vehicle sales and market share variations for consumer penetration. Our $1 price target simply reflects the current stagnant U.S. economy. A recovery to a 12 mm vehicle run rate implies a near $1.85 target, while a probably unrealistic recovery to 15 mm generates a $3.50 target.“
Harrigan also took note of the exceptional performance turned in by Ford (NYSE: F). Harrigan notes in his summary; “Encouragingly, strong SIRI partner Ford, with a 70%+ penetration rate, generated a 43.4% increase in sales.”
Harrigan feels that the idea of Sirius XM being delisted is “absurd” given its “$3.9 Billion market capitalization, or $6.5 Billion inclusive of the Liberty position and a very prominent consumer brand. The analyst believes that Sirius XM will be successful in receiving a new six month extension.
Also noted were potential synergies between Liberty Capital (Nasdaq: LCAPA) and Sirius XM with its Worldspace assets, following comments from Liberty CEO Greg Maffei Tuesday.
Position: Long SIRI