Sirius, XM: Price Targets and Expectations

Analysts are all weighing in on the quarterly reports of XM (XMSR) and Sirius (SIRI). Some analysts are negative on the sector while others are positive. Price targets are established using various models, and differing assumptions are made by each analyst. Some analysts are basing their estimates on a merger, while others are still using stand-alone models.

The Estimate Roundup:

Wachovia - Sirius - Market Perform with a valuation range of $2.50 to $3.50

Wachovia - XM - Market Perform with a valuation range of $10.00 to $13.00

Stifel - Sirius - Buy with a price target of $4.00

RBC - Sirius - Sector Perform with a price target of $3.00

Cowen - Sirius - Outperform (stock expected to outperform the S&P 500)

Citi - Sirius - Buy/Speculative with a price target of $8

Goldman Sachs - Sirius - Sell with a price target of $2.25

Goldman Sachs - XM - Sell with a price target of $11.50

Merrill Lynch - Sirius - Neutral with a $3.11 price target in 2008 and a $3.37 price target for 2009

As you can see, some analysts are bearish and others are bullish, but the majority fall into a very neutral area. For many, the uncertainty of the merger has made changing a rating on these stocks more difficult. Compound that with company performances that could be rated as “okay”, and there is not much to get excited about. Simply stated, these stocks are all about the merger right now.

Long term upside for these equities, in my opinion, will rely on the companies proving that a merger will deliver synergies and profits. While a merger announcement will bring a pop in stock price, the main consideration is where things will settle down. For longer term investors, the question seems to be whether you are willing to wait and see if all of this comes to fruition. The merger process seems to have taken a toll on the stocks, and tested the patience of the street. Like it or not, there will in my opinion be sellers on the merger news, and this could temper the rise in stock price.

Perhaps the best way to look at this situation is to see what expectations are, and whether or not you feel that the merged company can meet or beat them. At this point the companies are not firing on all cylinders. part of it is the wait on the merger, part of it is the current economy, and part of it is high costs.

The synergies are not all instantaneous, but some metrics could scale pretty quickly. A lot depends on how the merged company brands and markets itself (As Sirius, XM, Sirius/XM, or XM/Sirius). I feel it is important that they end consumer confusion and set on a path that markets whatever brand they intend to use. Once complete, this needs to seem like one company to the consumer. Exxon and Mobile did a good job maintaining both brand names while combining the company. Sprint and Nextel in my opinion did not. Once complete (if it passes FCC muster), these companies need to virtually resell the merger in the minds of the consumer.

Where am I in this mix? While I am not a financial advisor, I am bullish on merger news, and more neutral through the end of the year. As a consumer, I am bullish on the concept of satellite radio.

Position - Long Sirius, Long XM

Comments

[cos1000:]

Tavarres....Didn't anyone tell you...Your parents moved.

2008 May 14 09:16 PM

[killerkaul:]

RE: Cos1000, Tavarres's parents moved? Wha? Wha? Where am I sposed to live? Damit!!!!!!!!!

2008 May 14 09:37 PM

[po'd in Plano:]

Thanks for the article referral, I will definitely check it out. If/when/whether the FCC finally makes the merger a go, my educated guess on the resultant entity trading under a single ticker is within 60-90 days. Reg filings, etc. so probably looking at one final quarter of reporting for both companies

2008 May 14 09:48 PM

[163888:]

You all knew this was coming. Po'd in Plano, it is because George Town Partners has hired the right attorney a man that has worked for the FCC for some time and now knows the ins and outs of it. He is most likely the reason for them being able to get all the meetings with the FCC.

Exem, Mel has stated that, they are ready to go as soon as the approval comes. I know some might think this is fast, but barring any injunctions/suits being filed to stop it, I can see the whole thing being done with in a week or two at the most. As for the sympol, it really will not matter it will all be taken care of along with the transfer of shares to the new company what ever the name, automatically. You as a matter of fact will be able to trade SIRI one day then the next be trading the new company what ever the name.

2008 May 14 10:42 PM

[163888:]

P.S. I agree with cos1000 about GTP being what they are.

2008 May 14 11:05 PM

[163888:]

P.S.S., Exem, the name will be SIRI IMO. The reason is they are the ones taking over XMSR, SIRI has the most name recognition. But dont hold me to that. There have been plenty of other companies that have bought another conpany, and then taken on the name of the company they bought. That was generally for the name recognition, so we are back to the new name most likely be Sirious.

2008 May 14 11:18 PM

[flyman:]

Ohio Attorney General Marc Dann announced his resignation following a sex scandal. He was one of those 11 corrupt attorneys general who wrote a letter to the FCC, speaking out against the merger.
Isn't karma a bitch Marc?

2008 May 15 01:17 AM

[163888:]

flyman, That might be true, But I think that is just your normal democrat hypocrisy.

2008 May 15 07:54 AM

[po'd in Plano:]

It's odd, a simple comparison of market caps in the space shows some big-time players: CBS has a market cap north of $10 billion, Clear Channel also a market cap north of $10 billion (and they just went private in a heated LBO transaction).

SIRI and XM combined have ~ $8 billion market cap. Rupert Mudoch can own ~ any dang thing he desires to have but Mel you just have to wait.

2008 May 15 08:12 AM

[billporsche:]

Clearly , this is an example of politicians in the pocket of the influence peddlers. There is plenty of competition in this market but the politicians need their pockets lined. Personally , I think that the FCC is one of the worst offenders.

2008 May 15 08:36 AM

[barrel:]

what do you guys think SIRIUS will be worth if the FCC conditions are so bad that the deal is destroyed. This is the best solution for the FCC to save face. Approve the deal, but place conditions so tough that it kills the synergies. I think Sirius is much better long term, but do we expect a spike in the price?

Thanks
barrel

2008 May 15 08:52 AM

[163888:]

barrel, First of all I think SIRI/XMSR would go through with the merger under any circumstance then just not do what the FCC is asking of them. Really what can the FCC do? Ask yourself what have they done before, to punish any of the other crap that companies have consistantly done that according to the FCC they were not suppose to do. Answer = little to nothing. Also it would be a hard sell to any court to put many conditions on a merger that was already given the blessing by the DOJ saying none were needed. Your mandate cant be to protect the consumer then take away spectrum that would hurt the consumer you are trying to protect. The only thing the FCC can require of them is to stick with what SIRI/XMSR has already agreed to do or would not be a big deal to do.

2008 May 15 09:17 AM

[163888:]

barrel, here are a few examples; Many would say that the FCC required SIRI/XMSR to have a interopperable radio on the market. SIRI/XMSR say, no sorry, but we were only to develope one, we cant force the manufactures to make it. Those repeater towers that have sprung up was never suppose to happen according to what the FCC wanted they were suppose to be satellite radio not terrestial radio. Do you see what I mean, and there are number of other things done by many other companies.

2008 May 15 09:31 AM

[barrel:]

my concern is the market reaction to the FCC decision. I understand that in the long run the merged company will announce earnings and it will reflect their strategy, but i fear the stock plummeting to 1.50.

2008 May 15 10:49 AM

[killerkaul:]

RE: 163888 and Cos1000, Why hasn't Mel just, issued a statement of explanation, and gone ahead with the merger, now that a totally unreasonable, irrational amount of time has passed in which the impotent FCC has "DONE NOTHING," to quote my mentor J.C. It seems to me that all involved and interested parties would discount any reparations due to the stonewalling. I also feel the sentiment of the "STREET" is with Mel, and strongly against the FCC at this time. Wouldn't this be a positive influence on the merged stock price? What am I missing? Thanks. Gitrdonnnnnnnne.

2008 May 15 11:26 AM

[gekko13:]

I think we should secretly contact "The Jackal" and forward him the home addresses of those two dumb asses on the FCC board so he can pay them a "little visit".

2008 May 15 12:57 PM

[163888:]

My feeling Is from personal experience, you run the well dry first, going to court is always the last resort. I had a project that took over 2 years to get it through city siteplan and counsel. Even though we had every right and met every ordinance/code to build. Every month we had some new crap, our attorney would just keep saying, just keep letting have enough rope to hang themselves. Hell at one point we had the city attorney telling the siteplan they cant do that, they did anyway, we still waited. It is costly but most of all vary time consuming to go to court.

2008 May 15 03:11 PM

[163888:]

barrel, I would not worry about a 1.5 ever the last time that price was out SIRI had I think no are at the most vary few subcribers. Compared to 8.6 million now and being able to see the end of the tunnel for profit.

2008 May 15 03:17 PM

[cos1000:]

killerkaul.... As much as we are all waiting for the decision from the FCC to make this decision, and it is clearly their decision to make, the "road block" is the special interest groups wanting their free piece of this very lucrative pie.

All of this public record being entered at this time: the negotiations between the companies and the FCC, Opposition (NAB) and the FCC, so called neutral parties who only want spectrum for free (GTP and others) and the FCC, minority interest groups and the FCC, 11 (as of today 10) States Attorneys General and the FCC, will become the basis for years of litigation if a negotiated settlement for the license transfer is not reached now.

That is why it is so important for Martin to get a negotiated settlement that the 2 Democratic Members can sign off on. They then can put into public record a consensus vote: 5-0 or even 4-1 that will make legal action down the road by opposition interests more difficult. This obviously means that there will be concessions given by the companies. It would be very bad at this time for Mel to abandon the process, and drown the new company in litigation debt with outcome uncertainty.

Just my opinion...it's really way above my pay grade.

2008 May 15 04:54 PM

[killerkaul:]

RE: Cos1000, Well buddy, I think it's time you were given a sizable raise. I hadn't thought about the backdoor stonewalling designed to stop any forward progress, which would bankrupt the companies and shareholders, continueing the cash infusion into the FCC and related parties. Thanks for the enlightenment.

2008 May 15 05:24 PM