XM Satellite Radio: Miller Tabak Sees Buying Opportunity

Mill Tabak analyst David Joyce sees a buying opportunity due to the confusion of Wednesday's trading, and rumors that sent both Sirius (SIRI) and XM (XMSR) down sharply.

REPORT EXCERPTS

XM Satellite Radio (XMSR-$13.21-Buy)
December 13, 2007
David C. Joyce, CFA
Miller Tabak + Co., LLC

Upgrading XM Satellite Radio to Buy from Neutral on Regulatory Review ‘Confusion’ Sell-Off; Reiterate $17 Target for XMSR, Sirius Satellite Neutral and $3.50 Target

We are upgrading XM Satellite Radio (XMSR-$13.21-Buy-Target $17) to Buy from Neutral and keeping our $17 price target, as both XMSR and its merger partner Sirius Satellite Radio (SIRI - $3.29 – Neutral – Target $3.50) fell in large-volume, late-day regulatory review ‘confusion’ that led deal arbitrageurs to unwind their positions, thereby widening the XMSR exchange ratio gap to parity from about 8.8% at the beginning of the day to 14.6% currently.

There is 29% potential upside to our $17 target for XMSR, and 14.6% potential upside to the current SIRI trading-level-driven 4.6:1 exchange ratio parity level of $15.13.

Comments

[Pj568]

When does reality set in? The combined market value is 9.4B for these two insolvent companies. Hard to see how negative working capital and negative equity has this type of value. Or does it?

[sparky]

Tyler, please figure out a way to rally the troops and drive price to about $15 regardless of the merger outcome.